<PAGE>
As filed with the Securities and Exchange Commission on August 29, 1996
File No. 33-35156
File No. 811-6113
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER [X]
THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 10 [X]
(Check appropriate box or boxes)
---------------------
THE CALDWELL & ORKIN FUNDS, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
2050 Tower Place, 3340 Peachtree Road
Atlanta, Georgia 30326
------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (404)239-0707
(800)237-7073
H. Eugene Caldwell
THE CALDWELL & ORKIN FUNDS, INC.
2050 Tower Place, 3340 Peachtree Road
Atlanta, Georgia 30326
----------------------------------------
(Name and Address of Agent for Service)
----------------------
Copies to:
Michael B. Orkin Reinaldo Pascual, Esq.
President Kilpatrick & Cody, L.L.P.
C&O Funds Advisor, Inc. 1100 Peachtree Street, N.E.
2050 Tower Place, 3340 Peachtree Road Atlanta, Georgia 30309-4530
Atlanta, Georgia 30326
-----------------------
Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of the registration statement.
It is proposed that this filing will become effective (check appropriate box)
[x] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
Registrant has registered an indefinite number of securities
under the Securities Act of 1933. The Registrant will file the
Rule 24f-2 Notice for its fiscal year ending April 30, 1997 on or
about June 29, 1997 pursuant to Rule 24f-2 under the Investment
Company Act of 1940.<PAGE>
THE CALDWELL & ORKIN
MARKET OPPORTUNITY FUND
The Caldwell & Orkin Market Opportunity Fund (the "Fund") is a portfolio
of the Caldwell & Orkin Funds, Inc. ("Caldwell & Orkin"), an open-end
diversified management investment company. The Fund's objective is to
provide long-term capital growth with a short-term focus on capital
preservation through investment selection and asset allocation.
This Prospectus contains information about the Fund that a prospective
investor should know before investing. It should be retained for future
reference. A Statement of Additional Information about the Fund has been
filed with the Securities and Exchange Commission on August 29, 1996.
The Statement of Additional Information (which is hereby incorporated in
its entirety by reference into this Prospectus) contains more detailed
information about the Fund and may be obtained free of charge by writing
the Fund or calling 1-800-237-7073.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
========================================================================
August 29, 1996 2050 Tower Place (800) 237-7073
3340 Peachtree Road (404) 239-0707
Atlanta, Georgia 30326
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
PROSPECTUS SUMMARY 3
EXPENSE INFORMATION 4
FINANCIAL HIGHLIGHTS 5
INVESTMENT PHILOSOPHY OF THE MANAGER 7
INVESTMENT OBJECTIVES, POLICIES, METHODS AND RISKS 8
PERFORMANCE DATA 12
MANAGEMENT OF THE FUND 12
PURCHASE OF SHARES 13
REDEMPTION OF SHARES 15
TELEPHONE PURCHASES AND REDEMPTIONS
FOR SECURITIES FIRMS 16
DIVIDENDS, DISTRIBUTIONS, AND TAXES17
THE DISTRIBUTOR 17
ADDITIONAL INFORMATION 18
THE FUND 19
</TABLE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in
this Prospectus, and if given or made, such other information or
representations must not be relied upon as having been authorized by
Caldwell & Orkin, the Manager or the Distributor. This Prospectus does
not constitute an offering in any state in which such offering may not
lawfully be made.
MUTUAL FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE U. S.
GOVERNMENT, THE FDIC OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
2
<PAGE>
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND'S OBJECTIVE IS TO PROVIDE
CAPITAL GROWTH AND PRESERVATION THROUGH INVESTMENT SELECTION AND ASSET
ALLOCATION.
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVES. The Caldwell & Orkin Market Opportunity
Fund's objective is to provide long-term capital growth with a
short-term focus on capital preservation through investment
selection and asset allocation. The Fund seeks to outperform the
stock market over the long term, as measured by indices such as
the NASDAQ Composite and the S&P 500. Current income is only
an incidental consideration. The Manager attempts to achieve
these objectives through diversification of the Fund's portfolio
between long equity positions, short equity positions, bonds,
and cash equivalents. The Manager invests in companies of all
sizes having potential for capital appreciation. The Fund's asset
allocation is established by the Manager and will be modified regularly
based on current market conditions. The Manager emphasizes
equity investments and the Fund could have a substantial majority
of its assets invested in stocks at any time (90-100%).
THE MANAGER. C&O Funds Advisor, Inc. (the "Manager") acts as the
Fund's investment adviser. The Manager is an investment
counseling firm located in Atlanta, Georgia and a wholly-owned
subsidiary of Caldwell & Orkin, Inc., an investment management
firm with approximately $125 million in assets under management.
PURCHASE AND REDEMPTION OF SHARES. Shares of the Fund are
purchased through C&O Funds Distributor, Inc., the distributor
and principal underwriter of the Fund (the "Distributor") or from
broker/dealers that have dealer agreements with the Distributor.
Purchase and redemption orders may also be placed through member
firms of the National Association of Securities Dealers, Inc
("NASD"). These firms may charge a reasonable handling fee that
can be avoided by investing directly with the Fund through the
Distributor. The minimum initial purchase is $10,000, unless the
investor sets up an individual retirement account ("IRA") or a
Keogh account for which the minimum initial investment is $2,000.
After the initial purchase, the minimum is $1,000 for additional
purchases. Shares may be redeemed at any time.
INVESTMENT RISKS. The Fund uses aggressive investment strategies
that have the potential for yielding high returns; however,
these strategies may also result in losses. Share prices may
decline over short or even extended periods. These fluctuations
may cause your shares to be worth less than when you originally
purchased them. The Fund seeks long-term growth and should not be
used to meet short-term needs. Investors should consider the Fund
as a vehicle to balance their total investment program risks.
Investors should expect that the Market Opportunity Fund may
fluctuate independently of stock market indices, such as the S&P
500 and the NASDAQ Composite.
<PAGE>
In an effort to take advantage of declining values, the Fund may
establish short positions in securities. A short position
is established by selling borrowed shares and attempting to buy
them back at a lower price. Borrowed shares must eventually be
replaced whether or not the stock price declines. Therefore, the
Fund may purchase stock to replace borrowed shares at higher
prices than where the borrowed stock was sold thereby incurring a
loss. As with any mutual fund, there is no assurance that the
Fund will achieve its objectives.
3
<PAGE>
EXPENSE INFORMATION
The investor pays the following charges when buying or redeeming
shares of the Fund:
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases NONE
Deferred Sales Load NONE
Maximum Sales Load Imposed on Reinvested Dividends NONE
Redemption Fees NONE
Exchange Fees NONE
ANNUAL ESTIMATED FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees 0.90% *
12b-1 Fees NONE
Other Expenses
Operating Expenses 0.48%
Dividend Expense on Short Sales of Securities 0.18% **
---------
Total Fund Operating Expenses 1.56%
=========
* The Fund's Management Agreement provides for compensation to the
Manager at the annual rates of 0.90% of average daily net assets up to $100
million; 0.80% of average daily assets in excess of $100 million but not
more than $200 million; 0.70% average daily net assets in excess of $200
million but not more than $300 million; 0.60% of average daily net assets
in excess of $300 million but not more than $500 million; 0.50% of average
daily net assets in excess of $500 million. The Management Agreement
obligates the Fund to pay certain expenses incurred in its operations,
including the management fee, legal and audit fees, unaffiliated directors'
fees and expenses, and certain other operating costs. Fees equal to or
higher than 0.75% of average net assets may be higher than those generally
charged by investment advisers to other funds for investment advisory
services.
** SEC Regulation S-X Rule 6-03(g) requires cash dividends declared
on stocks for which the securities portfolio reflects a short position as
of the record date to be recognized as an expense on the ex-dividend date.
Annual fund operating expenses are paid out of the Fund's assets. Operating
expenses are factored into the share price and are not charged directly to
shareholder accounts.
</TABLE>
EXAMPLE: The following are the expenses on a $1,000 investment, assuming a
5% annual return and redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ----------------------
$16 $49 $85 $186
The Fee Table is presented to assist you in understanding the costs and
expenses that a shareholder in the Fund will bear directly or indirectly.
The example above assumes the reinvestment of all dividends and
distributions. THIS EXAMPLE IS NOT A REPRESENTATION OF ACTUAL OR EXPECTED
PERFORMANCE OR EXPENSES. WHILE THE EXAMPLE SSUMES A 5% ANNUAL RETURN, THE
FUND'S ACTUAL PERFORMANCE WILL VARY AND THE ACTUAL RETURN MAY BE GREATER OR
LESS.
4<PAGE>
FINANCIAL HIGHLIGHTS
The following table is included in the Fund's annual report. It
has been audited by Coopers & Lybrand, L.L.P. (1994 through 1996)
and Deloitte & Touche, L.L.P. (1991 through 1993). The Fund began
operations on March 11, 1991. The Fund's annual report contains
further information about the performance of the Fund as well as
the Fund's financial statements. The report is available without
charge by calling the Fund.
<TABLE>
<CAPTION>
Years Ended April 30
1996 1995 1994 1993 1992 1991<F3>
------ ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.35 $12.26 $12.94 $11.69 $10.49 $10.36
------ ------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income (Loss)<F2> .27 .54 .06 (.01) (.08) (.01)
Net Gains or Losses on Securities (Both
Realized and Unrealized) 3.31 (.81) 1.99 1.77 1.33 .14
------ ------ ------ ------ ------ ------
Total from Investment Operations 3.58 (.27) 2.05 1.76 1.25 .13
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from Net Investment Income (.44) (.41) (.04) -- -- --
Distributions from Capital Gains -- (.23) (2.69) (.51) (.05) --
------ ------ ------ ------ ------ ------
Total Distributions (.44) (.64) (2.73) (.51) (.05) --
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $14.49 $11.35 $12.26 $12.94 $11.69 $20.49
====== ====== ====== ====== ====== ======
Total Return 31.8% (2.28)% 16.48% 15.09% 11.86% 1.25%
Ratios and Supplemental Data:
Net Assets, End of Period (in $000's) $38,030 $32,261 $18,830 $15,116 $12,385 $11,552
Ratios to average net assets:
Expenses before dividends on
securities sold short (After
Reimbursement) 1.38% 1.18% 1.21% 1.30% 1.64% 1.95% <F1>
Expenses from dividends sold short .18% 0.45% -- -- -- -- <F1>
------ ----- ------ ------- ------- -------
Total expenses (After Reimbursement) 1.56% 1.63% 1.21% 1.30% 1.64% 1.95% <F1>
Total expenses (Before Reimbursement) 1.56% 1.79% 1.77% 2.00% 1.88% 2.18% <F1>
Net investment income (loss) 1.94% 3.55% .44% (.01%) (.76%) (.19%) <F1>
Portfolio Turnover Rate 222% 331% 292% 223% 50% 3%
<FN>
<F1> Adjusted to annual basis.
<F2> Had the Distributor and Manager not waived a portion of
the expenses, net investment income (loss) per share would have
been $.52, ($.01), ($.09), ($.10), and ($.03) for the periods
ended April 30, 1995 through 1991, respectively. No expenses
were waived for the fiscal year ended April 30, 1996.
<F3> Commencement of operations on March 11, 1991.
</FN>
</TABLE>
5
<PAGE>
PORTFOLIO TURNOVER. "Portfolio turnover" results from a change of the
securities held by the Fund and involves expense to the Fund in the form
of brokerage commissions and other transaction costs. The portfolio
turnover rate shown in the Financial Highlights assumes only the
portfolio securities purchased or sold, or whose maturity is greater than
one year, and excludes all transactions for shorting as they are
considered to be less than one year to maturity. The portfolio turnover
rate is quoted as a percentage of the average market value of investments
in long securities held throughout the year.
The Manager believes that the following calculation is more
representative of actual portfolio turnover. The Manager considers asset
allocation as a significant factor affecting investing policies utilized
by the Fund, and as such views the portfolio turnover rate based on the
entire composition of the Fund and not as merely the transactions of only
certain securities. This methodology assumes turnover includes all
transactions for long equity purchases and sales, equity shorts and
covers, and purchases and sales for fixed income securities with a
maturity greater than one year. The portfolio turnover rate is quoted as
a percentage of the average net assets of the Fund throughout the year.
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
264% 142% 164% 175% 50% 3%
6
<PAGE>
INVESTMENT PHILOSOPHY OF THE MANAGER
THE MANAGER'S INVESTMENT PROCESS IS A MULTI-DIMENSIONAL APPROACH THAT
SEEKS TO OUTPERFORM THE MARKET OVER THE LONG TERM.
INTRODUCTION. The underlying goal of the Manager's philosophy is
to deliver a combination of superior long-term growth with a
short-term focus on capital preservation. In order to achieve
results, a multifactor decision making process is applied to both
stock selection and asset allocation. The Manager has developed
this flexible approach which takes into consideration the
volatile nature of the markets. Although the goal is strong
performance, the Manager believes that to achieve solid returns
over time, attention must be paid to how those returns are
attained. The Manager focuses on risk not just returns.
THE MANAGER FOCUSES ON "CHANGE" IN STOCK SELECTION.
STOCK SELECTION. The Manager focuses on "change" when selecting
stocks. "Change" in its broadest context leads to shifts in
fundamentals and expectations. The Manager studies a variety of
factors (qualitative as well as quantitative) to identify the
best opportunities either for a long position or short position.
Recognizing that different factors are significant for different
companies, the Manager determines which factors are expected to
impact stock prices and acts accordingly. Examples of factors
considered in stock selection include management, earnings
growth, and industry variables.
ASSET ALLOCATION IS USED TO PURSUE THE GOAL OF CONTROLLING RISK
AND IMPROVING RETURNS.
ASSET ALLOCATION. Asset allocation is used to pursue the goal of
controlling risk and improving returns. The Manager determines
the percent of the Fund devoted to long equity positions, short
equity positions, bonds, and cash equivalents. To help determine
asset allocation, eight major factors are used: liquidity,
inflation, economics, valuation, sentiment, supply/demand, global
currents and momentum/breadth. Liquidity, inflation, and
economics are the three most important in identifying trends.
They demonstrate varying degrees of cause and effect
relationships with stock price movements. The remaining
variables are more correlative in nature and become important at
extremes.
FACTOR GLOSSARY. Listed below are the eight major factors used
in asset allocation.
ECONOMIC LIQUIDITY - The relationship between liquidity or
money supply and economic growth. Bullish when money supply
increases faster than the economy - excess economic liquidity
flows into stocks and bonds. Bearish when the economy grows
faster than money supply - money is withdrawn from financial
assets to purchase plant, equipment, and other products.
INFLATION - A measure of the cost of living. Bullish for stocks
when falling and positive. Bearish for stocks when rising or if
negative.
VALUATION - Various measures to determine whether stocks are
cheap or expensive based on historic norms. Usually equities
remain cheap or
7
<PAGE>
expensive over long periods of time depending on the investing
environment. "Green flag" when cheap. "Red flag" when
expensive.
SENTIMENT - Surveys taken to determine if investors are feeling
positive or negative about financial assets. Bullish when too
many individuals are pessimistic. Bearish when too many investors
are optimistic.
SUPPLY/DEMAND - The relationship of stock supply (increases with
initial public and secondary offerings) with demand (decreases
with stock buy backs and insider purchases). Bullish with low
supply and high demand of stock. Bearish in the reverse.
MOMEMTUM/BREADTH - The action (trend, speed, and breadth) of
general security price movements. Bullish when markets move in
gradual uptrend (price momentum) with most stocks moving up
(broad breadth). Bearish when the opposite occurs.
GLOBAL FACTORS - The same broad array of the factors described
above applied on a global basis to determine their impact on
domestic financial markets.
THE MANAGER'S MULTI-DIMENSIONAL APPROACH IS DYNAMIC AS WELL AS
FLEXIBLE IN TERMS OF THE CHANGING EMPHASIS OF THE MARKETS.
SUMMARY. The Manager's investment process is a multi-dimensional
approach that seeks to outperform over the long term, but with
less market risk. The Manager's approach is dynamic as well as
flexible in terms of responding to the changing emphasis of the
markets.
INVESTMENT OBJECTIVES, POLICIES, METHODS AND RISKS
THE UNDERLYING GOAL OF THE MANAGER'S PHILOSOPHY IS TO DELIVER A
COMBINATION OF SUPERIOR LONG-TERM GROWTH WITH A SHORT-TERM FOCUS
ON CAPITAL PRESERVATION.
The Caldwell & Orkin Market Opportunity Fund's objective is to
provide long-term capital growth with a short-term focus on
capital preservation through investment selection and asset
allocation. The Fund seeks to outperform the stock market over
the long term, as measured by indices such as the NASDAQ
Composite and the S&P 500. Current income is only an incidental
consideration. The Manager will attempt to achieve these
objectives through diversification of the Fund's portfolio
between long equity positions, short equity positions, bonds, and
cash equivalents. The Manager invests in companies of all sizes
having potential for capital appreciation. The Fund's asset
allocation is established by the Manager and will be modified
regularly based on current market conditions. The Manager
emphasizes equity investments and the Fund could have a
substantial majority of its assets invested in stocks at any time
(90-100%).
The Fund will invest in common stocks and other equity-type
securities, corporate bonds and notes, agencies and convertibles,
and U.S. government obligations and cash equivalent securities.
(For further explanation, see
8
<PAGE>
"Investment in objective, Fixed Income Securities" page 10). The
Manager will establish allocation levels for the Fund based on
current market conditions. When the Manager determines that
favorable conditions exist, asset allocation to equities can be
expected to fall in the range of 90% to 100% of total fund
assets. When the Manager determines that unfavorable conditions
exist, asset allocations will be modified to include higher
proportions of cash equivalents. In efforts to profit from a
deteriorating stock market while striving to attain the Fund's
objective,the Manager may initiate short positions which
cumulatively could reach a maximum level of 25% of total fund
assets.
Because the Fund invests primarily in common stocks, shares of
the Fund will be subject to market risk, i.e., the possibility
that stock prices could decline over short or even extended
periods. The stock market tends to be establish asset cyclical,
with periods when the prices of stocks generally rise and periods
when they generally decline. Historically, the market has been
characterized by volatility in the short run and growth in the
long run.
In an attempt to protect as well as profit from declining
markets, techniques such as asset allocation and short sales of
securities may be employed by the Manager. These techniques could
cause the Fund's performance to deviate from that of market
indices such as the Standard & Poor's 500 Index or the NASDAQ
Composite Index. For example, a high level of cash or a large
short position could result in the Fund's performance being more
favorable relative to market indices. Conversely, due to a large
cash or short position the Fund may not participate in market
advances and Fund performance could possibly lag market indices.
Therefore, the Fund is intended to be a long-term investment
vehicle and should not be used to meet short-term needs.
THE FUND MAY ENGAGE IN THE SHORT SALE OF SECURITIES TO PROFIT
DURING MARKET DECLINES.
INVESTMENT IN SHORT SALES OF SECURITIES. The Manager may
establish short positions in an attempt to protect against market
declines and improve returns, and will choose from among
securities that are listed on a national securities exchange or
on the NASDAQ. The Manager establishes a short position by
selling a security it does not own and makes delivery by
borrowing the security it sold. It then repays the lender of the
securities by covering its purchase in the marketplace, ideally
at a lower price than that for which it sold the securities,
thereby taking advantage of declining values. Conversely, if the
price of the security goes up after the Manager establishes its
short position, it will lose money. The Fund may hold up to 25%
of its assets in short positions, and will limit its short sales
of securities of any single issuer if the market value of the
securities that have been sold short by the Fund would exceed two
percent (2%) of the value of the Fund's net assets or if such
securities would constitute more than two percent (2%) of any
class of the issuer's securities.
Proceeds from short-sale transactions (other than those for which
the Fund already owns a long position, or "shorts against the
box") are maintained in a segregated account with the Fund's
9
<PAGE>
custodian. In that account the Fund will maintain, on a daily
basis, liquid assets (such as cash or U.S. Government
securities) in an amount sufficient to cover the current value of
the securities to be replaced as well as any dividends, interest
and/or transaction costs due to the broker upon completion of the
transaction. In determining the amount to be held in the
segregated account, the securities that have been sold short are
marked to market daily. To the extent the hmarket price of the
security increases, additional assets will be segregated to
ensure adequate reserves.
MONEY MARKET INSTRUMENTS AND FIXED INCOME SECURITIES MAY BE HELD
WHEN THE MANAGER BELIEVES THAT A PORTFOLIO OF FIXED INCOME
SECURITIES WILL OUTPERFORM THE STOCK MARKET.
INVESTMENT IN FIXED INCOME SECURITIES. At most times, the Fund's
assets will be invested primarily in equity securities. However,
money market instruments, U.S. Government securities and
obligations, preferred stocks or certificates of deposit of
commercial banks, and other fixed income securities may be held
when a defensive position is warranted or when the Manager
believes that a portfolio of fixed income securities will
outperform the stock market or in order for the Fund to receive a
greater return on its idle cash. While the Fund maintains a
defensive position and/or invests in cash or fixed income
securities, investment income will increase and may constitute a
larger portion of the return. The Fund probably will not
participate in market advances or declines to the extent that it
would if it was fully invested. The Fund's fixed income
investments may consist of corporate bonds and notes and U.S.
government obligations. The Fund will limit its investments in
corporate bonds and notes to those which have been
assigned one of the highest four ratings of either Standard &
Poor's Corporation or Moody's Investors Service, Inc., at the
time of their purchase, or unrated bonds and notes which the
Manager believes to be of comparable quality. The Fund may also
invest up to 10% of its total assets in corporate bonds and notes
rated below Standard & Poor's and Moody's four highest ratings if
the Manager believes that the rating of such bonds or notes will
be upgraded in the near future and/or the Manager believes that
the investment in any particular bond or note will help the Fund
achieve its objective of capital growth and preservation without
subjecting the Fund to undue risk. For a discussion of Standard &
Poor's and Moody's ratings for corporate bonds and notes, see
Appendix A to the Statement of Additional Information.
Cash equivalent securities in which the Fund may invest include
U.S. government obligations, U.S. government agency securities,
commercial paper, bankers' acceptances, certificates of deposit,
time deposits and other money market instruments. The Fund will
only invest in commercial paper rated no lower than A-2 by
Standard & Poor's or Prime-2 by Moody's. For a discussion of
these ratings, see Appendix A to Statement of Additional
Information.
10
<PAGE>
The Fund's investments in fixed income securities will generally
be subject to both credit risk and market risk. Credit risk
relates to the ability of the issuer to meet interest or
principal payments as they become due. Market risk relates to
the fact that market values of fixed income securities generally
will be affected by changes in the level of interest rates.
Generally, as interest rates rise, the market value of fixed
income securities will fall. Conversely, as the interest rates
fall, the market value of fixed income securities will rise.
Also, yields and market values of lower rated securities tend to
fluctuate more than high rated securities. The risks of greater
fluctuations in yield and value occur because investors generally
perceive issuers of lower rated securities to be less
creditworthy. Fluctuations in market value do not affect the
interest income from the securities, but are reflected in the
Fund's net asset value.
INVESTMENTS IN FOREIGN SECURITIES. The Fund may invest up to 25%
of its assets in equity securities that are issued by foreign
issuers and are traded in the United States. These securities
must be issued by foreign companies that comply with U.S.
standards. The Fund may also invest in American Depository
Receipts ("ADRs"). ADRs are receipts typically issued by a U.S.
bank or trust company which show ownership of underlying
securities of foreign corporations. By investing in these
securities the Manager attempts to take advantage of differences
between economic trends and the performance of securities markets
in various countries.
Investing in foreign securities involves risks and opportunities
nottypically associated with investing in U.S. securities. The
following considerations must be taken into account: fluctuations
in exchange rates of foreign currency; possible implementation of
exchange control regulations orcurrency restrictions that would
prevent cash from being brought back to the U.S.; lack of uniform
accounting, auditing and financial reporting standards; lack of
uniform settlement periods and trading practices; less liquidity
and frequently greater price volatility in foreign markets than
in the U.S.; possible expropriation or nationalization of assets;
and a possible imposition of foreign taxes. Furthermore, the U.S.
government has from time to time in the past imposed restrictions
on foreign investments by U.S. investors.
GENERAL. The Fund's investment objective is a fundamental policy
and may not be changed without a vote of a majority of the
outstanding voting shares of the Fund. No assurance can be given
that the Fund will achieve its bjectives.
11
<PAGE>
TOTAL RETURN FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE.
PERFORMANCE DATA
Comparative performance information may be used from time to time
in advertising or marketing the Fund's shares, including data
from or regarding the S&P 500 and the NASDAQ Composite Index.
From time to time the Fund may also provide its total return in
advertisements, sales literature or reports, and other
communications to shareholders. The Fund's total return for a
given period will be computed based on the Fund's change in net
asset value per share between the beginning of the period and the
end of the period shown and assume reinvestment of the Fund's
dividends and capital gains distributions during the period. The
Fund's performance will vary depending upon market conditions,
the composition of the portfolio, management fees and other
operating expenses. Total return figures will be based on
historical earnings and will not be intended to indicate future
performance.
The Fund's performance, as well as management's discussion of
factors affecting performance, are provided at least twice a
year in reports to all shareholders. For current performance
including shareholder reports, please call 1-800-237-7073.
MANAGEMENT OF THE FUND
THE RESPONSIBILITY FOR MAKING DECISIONS TO BUY, SELL OR HOLD A
PARTICULAR SECURITY RESTS WITH THE MANAGER, SUBJECT TO REVIEW BY
THE BOARD OF DIRECTORS.
BOARD OF DIRECTORS. The Caldwell & Orkin Market Opportunity Fund
is governed by a Board of Directors, which is responsible for
protecting the interests of shareholders. The directors are
experienced executives who meet throughout the year to oversee
the Fund's activities, review contractual arrangements with
companies that provide services to the Fund, and review
performance. A majority of the Fund's directors are not
affiliated with the Manager. For information regarding each
director of the Fund, see "Management of the Fund" in the
Statement of Additional Information.
MANAGEMENT ARRANGEMENT. C&O Funds Advisor, Inc. (the
"Manager"), an independent investment counseling firm with its
offices located at 2050 Tower Place, 3340 Peachtree Road,
Atlanta, Georgia 30326, has entered into a management agreement
with the Fund pursuant to which the Manager provides investment
advisory and management services to the Fund. The Manager was
formed in 1986 and is a wholly-owned subsidiary of Caldwell &
Orkin, Inc. ("C&O"). C&O, formed in 1982, presently provides
investment advisory
12
<PAGE>
services to corporations, individual investors, and other
institutions, and has funds under management of approximately
$125 million. Michael B. Orkin is the sole shareholder of C&O.
While the Manager is at all times subject to the direction of the
Board of Directors of the Fund, the Management Agreement provides
that the Manager is responsible for the actual management of the
Fund's portfolio. The responsibility for making decisions to buy,
sell or hold a particular security rests with the Manager,
subject to review by the Board of Directors. The Manager is also
obligated to perform certain administrative and management
services for the Fund, and is obligated to provide all the office
space facilities, equipment and personnel necessary to perform
its duties under the Management Agreement.
The Manager shall receive monthly compensation at annual rates
which vary according to the total assets of the Fund. On an
annual basis, the advisory fee is equal to the following for the
Fund:
0.90% of average daily net assets up to $100 million; 0.80% of
average daily net assets in excess of $100 million but not
more than $200 million; 0.70% of average daily net assets in
excess of $200 million but not more than $300 million; 0.60%
of average daily net assets in excess of $300 million but not
more than $500 million; 0.50% of assets in excess of $500
million.
PORTFOLIO MANAGER
Michael B. Orkin. Michael B. Orkin has been primarily responsible
for the day to day management of the Fund's portfolio since
August 24, 1992. Mr. Orkin is President and Chief Executive
Officer of Caldwell & Orkin, Inc. Prior to his current position,
he was an assistant portfolio manager with Pacific Equity
Management, as well as an analyst for both Oppenheimer Capital
Corporation and Ned Davis Research. He graduated from Vanderbilt
University with a B.S. in Economics and earned an MBA in Finance
from the University of Chicago Graduate School of Business Mr.
Orkin is a Chartered Financial Analyst.
PURCHASE OF SHARES
C&O Funds Distributor, Inc. (the "Distributor) is the principal
underwriter of the Fund's shares. Shares may be purchased
directly from the Distributor or from dealers which have entered
into dealer agreements with the Distributor. Purchase orders may
also be placed through member firms of the National Association
of Securities Dealers, Inc. who may charge a reasonable handling
fee. Such handling fees can be avoided by investing directly with
the Fund through the Distributor which acts as agent for the
Fund. Investors opening a new account must complete an
application which can be obtained through the Distributor or
dealer. If the purchase is made through a dealer, the dealer will
supply the Fund with the required account information.
13
<PAGE>
SHARES MAY BE PURCHASED DIRECTLY FROM THE DISTRIBUTOR OR FROM
DEALERS WHICH HAVE ENTERED INTO DEALER AGREEMENTS WITH THE
DISTRIBUTOR.
The Fund's shares are purchased after receipt of the application
form by the Distributor and receipt by the Fund's custodian of
your investment. Shares will be purchased at next determined net
asset value.
Dealers other than Distributor have the responsibility for
promptly transferring the investor's applications and investment
to the Fund and the custodian, respectively, so that the
investor's shares are purchased at the next determined net asset
value after receive of the investor's investment by the dealer.
The minimum initial purchase is generally $10,000 for the Fund.
However, if the account is an Individual Retirement Account
("IRA") or Keogh account, then the Fund will accept a minimum
investment of $2,000. The subsequent minimum purchase is
generally $1,000 for all accounts. Any order may be rejected by
the Distributor or the Fund. Investors may currently purchase
shares of the Fund without a sales charge; however, the Fund
reserves the right, upon sixty (60) days written notice to
shareholders, to impose a sales load or other conditions on
further purchases.
PURCHASING BY MAIL. Complete and sign your application, make a
check payable to the Caldwell & Orkin Market Opportunity Fund and
mail to: Caldwell & Orkin Market Opportunity Fund c/o C&O Funds
Distributor, Inc., 2050 Tower Place, 3340 Peachtree Road,
Atlanta, Georgia 30326
PURCHASING BY WIRE. Investors may purchase shares of the Fund by
transmitting Federal Funds by bank wire to MGF Service
Corporation (the "Transfer Agent"). Federal Funds should be wired
as follows:
Fifth Third Cincinnati
ABA #042000314
For Caldwell & Orkin FFC Acct. #713-76953
To: (Shareholder Name and Account #)
The funds received by the Transfer Agent will be forwarded to the
Fund's custodian. The Fund will not be responsible for delays in
the wiring system. To purchase shares by wiring funds, payments
should be wired to MGF Service Corporation. Instructions for new
accounts should include the name, address and social security
number or taxpayer identification number of each person in whose
name the shares are to be registered and the name of the
14
<PAGE>
Fund. The required application should be forwarded to the
Distributor. Please note that your bank may impose a charge for
providing wire transfer services.
REDEMPTION OF SHARES
Shareholders may redeem shares of the Fund by submitting a
written notice to the Fund. The written notice must include
signatures of all record owners. The signatures must be
guaranteed by a national bank, a bank that is a member of the
Federal Reserve System, or a member firm of any national or
regional securities exchange. Payment will ordinarily be by check
and mailed within three (3) business days of receipt of the
proper notice of redemption. The signature guarantee is not
required if the redemption amount is less than $20,000 and the
proceeds are to be sent by a check to the address on file.
Shareholders may also request to have the proceeds wired to a
predesignated bank account. You must include with the written
request the bank name, account number, and wiring instructions.
The signatures must be guaranteed. The Fund may hold payment on
the redemption of shares of the Fund until the check used to
purchase the shares has been cleared for payment by the
shareholder's bank. This process may take up to fifteen (15) days
from the purchase date.
Shares may also be redeemed through member firms of the National
Association of Securities Dealers, Inc. who may charge a
reasonable handling fee. Member firms of the NASD may telephone
MGF Service Corporation at (513) 629-2070 and place redemption
orders on behalf of investors who carry their Fund investments
through the member's account with the Fund.
The Board of Directors may determine, in the event that it would
be detrimental to the remaining shareholders of the Fund to make
payments in cash, the Fund may pay the redemption price by a
distribution of readily marketable securities. For further
details see "Redemption of Shares" in the Statement of Additional
Information.
Due to the high cost of maintaining smaller accounts, the Fund
will notify you if your account falls below $10,000 as a result
of redemptions. You will have sixty (60) days to make an
additional investment to bring the account balance up to at least
$10,000. Non-compliance could result in liquidation of the
account.
15
<PAGE>
TELEPHONE PURCHASES AND REDEMPTIONS FOR SECURITIES FIRMS
The following purchase and redemption telephone procedures have
been established by the Fund for investors who purchase Fund
shares through member firms of the NASD who have accounts with
the Fund for the benefit of their clients. Telephone purchases
and redemptions will be effected by the Fund only through such
NASD members, who in turn will be responsible for crediting the
investor's account at the NASD member with the amount of purchase
or redemption.
NASD member firms may charge a reasonable handling fee for
providing this service. Such fees are established by each NASD
member acting independently from the Fund and neither the Fund
nor the Distributor receives any part of such fees. Such handling
fees may be avoided by investing directly with the Fund through
the Distributor, but investors doing so will not be able to avail
themselves of the Fund's telephone privileges.
Member firms of the NASD may telephone the MGF Service
Corporation at (513) 629-2070 and place purchase and redemption
orders on behalf of investors who carry their Fund investments
through the member's account with the Fund.
PURCHASES BY TELEPHONE. Shares shall be purchased at the next
determined net asset value. Payment for shares purchased must be
received from the NASD member firm by the Fund by wire no later
than the third business day following the purchase order. If
payment for any purchase order is not received on or before the
third business day, the order is subject to cancellation by the
Fund, and the NASD member firm's account with the Fund will
immediately be charged for any loss.
REDEMPTION BY TELEPHONE. The redemption price is the net asset
value next determined after the receipt of the redemption request
by the Fund. Shares purchased by telephone may not be redeemed
until after the Fund has received good payment.
By electing telephone purchase and redemption privileges, NASD
member firms, on behalf of themselves and their clients, agree
that neither the Fund, the Distributor nor the Transfer Agent
shall be liable for following instructions communicated by
telephone and reasonably believed to be genuine. The Fund and its
agents provide written confirmations of transactions initiated by
telephone as a procedure designed to confirm that telephone
instructions are genuine. In addition, all telephone transactions
are recorded. As a result of these and other policies, the
NASD member firms may bear the risk of any loss in the event of
such a transaction. If the Fund fails to employ this and other
established procedures, it may be liable. The Fund reserves the
right to modify or terminate these telephone privileges at any
time.
16
<PAGE>
THE FUND INTENDS TO DISTRIBUTE ALL OF ITS NET INVESTMENT INCOME
AND NET REALIZED LONG AND SHORT-TERM CAPITAL GAINS TO ITS
SHAREHOLDERS ANNUALLY.
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to distribute all
of its net investment income and net realized long and short-term
capital gains to its shareholders annually. Generally, net
investment income dividend payments and capital gains
distributions are made during December and April of each year.
Unless specific instructions are given to the Distributor,
dividends and distributions will automatically be reinvested in
additional shares of the Fund. Shareholders may elect on the
application to receive dividends or distributions in cash. In
both cases, dividends and distributions are taxable as discussed
below.
TAXES. Dividends paid by the Fund from its ordinary income and
distributions of the Fund's net realized short-term capital gains
are taxable to non-tax-exempt investors as ordinary income.
Distributions made from the Fund's net realized long-term capital
gains are taxable to shareholders as long-term capital gains
regardless of how long the shareholder has owned Fund shares.
The Fund will provide its shareholders with a written notice as
to the amounts of any dividends or capital gains distributions no
later than 60 days after the close of its taxable year.
If you redeem your Fund shares you will have a short or long-term
capital gain or loss depending upon the amount of time you owned
the shares.
Shareholders are urged to consult their tax advisors as to the
particular tax consequences of the acquisition, ownership and
disposition of shares of the Fund, including the application of
state, local, and foreign tax laws and possible future changes in
federal tax laws. Foreign investors should consider applicable
foreign taxes in their evaluation of an investment in the Fund.
THE DISTRIBUTOR ACTS AS THE AGENT ONCE THE ORDERS ARE RECEIVED
FROM INVESTORS.
The Fund has entered into a Distribution Agreement with the
Distributor. The Distributor acts as the agent once the orders
are received from investors. The Distributor's main office is
located at 2050 Tower Place, 3340 Peachtree Road, Atlanta,
Georgia 30326.
17
<PAGE>
The Distribution Agreement obligates the Distributor to pay
certain expenses in connection with the offering of the shares of
the Fund. After the prospectuses, statements of additional
information and periodic reports have been prepared and mailed to
current shareholders, the Distributor pays for certain expenses
of distribution of the Fund's shares. For further information,
see "Distribution Agreement" in the Statement of Additional
Information.
THE NET ASSET VALUE OF THE SHARES IS DETERMINED ONCE DAILY AT 4PM
EVERY DAY THE NEW YORK STOCK EXCHANGE IS OPEN FOR TRADING.
ADDITIONAL INFORMATION
DETERMINATION OF NET ASSET VALUE. The net asset value of the
shares of the Fund is determined once daily as of 4:00 p.m.
(Eastern Standard Time) every day the New York Stock Exchange is
open for trading. The Fund will also determine its net asset
value once daily every day there is sufficient trading in its
portfolio of securities that the net asset value might be
materially affected.
The price of each holding in the Fund's portfolio is based on the
closing price. However, if a holding did not trade that day, the
last bid price is used for a value instead. The net asset value
per share is computed by dividing the sum of the value of the
securities held by the Fund plus any cash or other assets
(including interest and dividends accrued but not yet received)
minus all liabilities (including accrued expenses) by the total
number of shares outstanding at such time, rounded to the nearest
cent. Expenses, including the management fee payable to the
Manager, are accrued daily.
Equity securities listed or traded on a national securities
exchange or quoted on the over-the-counter market are valued at
the last sale price on the day of valuation or, if no sale is
reported, at the last bid price. Valuations of fixed income
securities are supplied by independent pricing services approved
by the Fund's Board of Directors. Money market securities with a
remaining maturity of 60 days or less are valued on an amortized
cost basis if their original term to maturity from the date of
purchase was 60 days or less, or by amortizing their value on the
61st day prior to maturity, if their term to maturity for the
date of purchase exceeded 60 days, unless the Board of Directors
determines that such valuation does not represent fair value.
Other assets and securities for which market quotations are not
readily available are valued at fair value as determined in good
faith by or under the direction of the Fund's Board of Directors.
SHAREHOLDERS RECEIVE QUARTERLY STATEMENTS, PERFORMANCE SUMMARIES,
AND TAX INFORMATION.
INVESTMENT ACCOUNT. Each shareholder has an investment account
and will receive quarterly statements from the Transfer Agent as
well as confirmation statements after each transaction showing
the cumulative activity in the account since the beginning of the
year. After the end of each year, shareholders will receive
Federal income tax information regarding dividends and capital
gains
18
<PAGE>
distributions. Shareholder inquiries should be made to the Fund
at the address on the front of this Prospectus.
On a semi-annual basis, the Manager will send investors a
performance summary outlining percentages of security positions
in the Fund as well as a letter regarding the Fund's results.
TRANSFER, REDEMPTION, AND DIVIDEND DISBURSING AGENT. MGF Service
Corporation, 312 Walnut Street, Cincinnati, Ohio 45202, acts as
the Transfer, Redemption, and Disbursing Agnet for the Funds.
MGF Service Corp. also provides the Fund with services in
connection with registration of the Fund shares pursuant to
state securities laws.
THE FUND
The Fund is a portfolio of The Caldwell & Orkin Funds, Inc.
("Caldwell & Orkin"), an open-end, diversified management
investment company incorporated under the laws of the State of
Maryland on August 15, 1989.
Caldwell & Orkin's address is 2050 Tower Place, 3340 Peachtree
Road, Atlanta, Georgia 30326, and its telephone number is (404)
239-0707.
DESCRIPTION OF SHARES. The Caldwell & Orkin Funds, Inc. has an
authorized capital of 45,000,000 shares of Common Stock, par
value $0.10 per share, 15,000,000 of which have been classified
as shares for the Market Opportunity Fund. The Board of Directors
can authorize and issue additional classes of stock by
classifying or reclassifying unissued stock without stockholder
approval. If liquidated, each share of Common Stock is entitled
to a pro rata portion of the particular Fund's assets after
payment of debts and expenses. Shareholders of each Fund are
entitled to one vote for each share held and fractional votes for
a fractional share held. Shareholders will vote on the election
of Directors and any other matter submitted to a shareholder
vote. Shareholders also have the right to remove Directors.
Caldwell & Orkin does not intend to hold a meeting of
shareholders in any year in which the Investment Company Act of
1940 does not require shareholders to act upon one or more of the
following matters: election of Directors, approval of an
investment advisory agreement, approval of a distribution
agreement, or ratification of selection of independent
accountants. Voting rights for Directors are not cumulative.
Shares issued are fully paid and non-assessable, and have no
preemptive or conversion rights.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. A director or officer
of Caldwell & Orkin shall not be liable to the Fund or its
shareholders for monetary damages. See the Articles of
Incorporation and Bylaws on file with the Securities and Exchange
Commission for the full text of these provisions.
19
<PAGE>
BOARD OF DIRECTORS TRANSFER AGENT
H. Eugene Caldwell MGF Service Corp
Michael B. Orkin 312 Walnut Street
Frederick T. Blumer Cincinnati, Ohio 45202
David L. Eager
Robert H. Greenblatt INDEPENDENT ACCOUNTANTS
Henry H. Porter, Jr.
Coopers & Lybrand, L.L.P.
1100 Campanile Building
MANAGER 1155 Peachtree Street
Atlanta, Georgia 30309-3630
C&O Funds Advisor, Inc.
2050 Tower Place LEGAL COUNSEL
3340 Peachtree Road Kilpatrick & Cody, L.L.P.
Atlanta, Georgia 30326 1100 Peachtree Street
Suite 2800
DISTRIBUTOR Atlanta, Georgia 30309-4530
C&O Funds Distributor, Inc.
2050 Tower Place
3340 Peachtree Road
Atlanta, Georgia 30326
CUSTODIAN
Bank One Ohio Trust Company, N.A.
Brooksedge Eight
Columbus, Ohio 43271-0393
20
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
August 29, 1996
MARKET OPPORTUNITY FUND
OF
THE CALDWELL & ORKIN FUNDS, INC.
2050 Tower Place
3340 Peachtree Road
Atlanta, Georgia 30326
Telephone No. (404) 239-0707
(800) 237-7073
_______________
The Caldwell & Orkin Market Opportunity Fund (the "Fund") is a
portfolio of the Caldwell & Orkin Funds, Inc. ("Caldwell &
Orkin"), an open-end diversified management investment company.
The Fund's objective is to provide long-term capital growth with
a short-term focus on capital preservation through investment
selection and asset allocation.
This Statement of Additional Information of Caldwell & Orkin
is not a prospectus and should be read in conjunction with the
Fund's Prospectus, dated August 29, 1996 (the "Prospectus"),
which has been filed with the Securities and Exchange Commission
and can be obtained, without charge, by calling or by writing
Caldwell & Orkin at the above telephone number or address. This
Statement of Additional Information has been incorporated by
reference into the Prospectus.
_______________
C & O FUNDS ADVISOR, INC. - MANAGER
B-1
<PAGE>
TABLE OF CONTENTS
Page
----
THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . B-3
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS . . B-3
Investments in Small Companies . . . . . . . . . . . . B-3
Investments in Short Sales of Securities . . . . . . B-4
Investments in Foreign Securities . . . . . . . . . . B-5
Lending of Portfolio Securities . . . . . . . . . . . B-6
Repurchase Agreements . . . . . . . . . . . . . . . . B-6
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . B-7
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . B-9
Board of Directors . . . . . . . . . . . . . . . . . B-9
Officers . . . . . . . . . . . . . . . . . . . . . . B-10
Directors . . . . . . . . . . . . . . . . . . . . . . B-11
Management and Advisory Arrangements . . . . . . . . B-11
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION . . . . . . B-13
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . B-15
PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . B-15
Purchase by Exchange of Securities . . . . . . . . . . B-15
THE DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . B-16
REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . B-17
SHAREHOLDER SERVICES . . . . . . . . . . . . . . . . . . . B-17
Investment Account . . . . . . . . . . . . . . . . . B-18
Reinvestment of Dividends and Capital
Gains Distribution . . . . . . . . . . . . . . . . B-18
DIVIDENDS, DISTRIBUTIONS AND TAXES . . . . . . . . . . . . B-18
Dividends and Distributions . . . . . . . . . . . . . B-18
Taxes . . . . . . . . . . . . . . . . . . . . . . . . .B-18
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . B-20
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . B-22
Description of Shares . . . . . . . . . . . . . . . . B-22
Principal Shareholders . . . . . . . . . . . . . . . B-23
Independent Auditors . . . . . . . . . . . . . . . . B-23
Custodian . . . . . . . . . . . . . . . . . . . . . . B-24
Transfer, Redemption, and Dividend Disbursing Agent . B-24
Legal Counsel . . . . . . . . . . . . . . . . . . . . B-24
Reports to Shareholders . . . . . . . . . . . . . . . B-24
Additional Information . . . . . . . . . . . . . . . B-24
Financial Statements and Independent Auditors' Report B-24
B-2<PAGE>
THE FUND
The Fund is the only series of The Caldwell & Orkin Funds,
Inc. ("Caldwell & Orkin"), an open-end, diversified management
investment company incorporated under the laws of the State of
Maryland on August 15, 1989. Prior to June, 1992, Caldwell &
Orkin's name was The OTC Select-100 Fund, Inc. and consisted of
only one portfolio (The "OTC Select-100 Fund"). The shareholders
of The OTC Select-100 Fund subsequently approved changing the
corporate name from The OTC Select-100 Fund, Inc. to The Caldwell
& Orkin Funds, Inc. and to amend the investment objective and
policies of The OTC Select-100 Fund. As a result of such
amendment, The OTC Select-100 Fund was renamed and its assets and
objectives were those of the Caldwell & Orkin Aggressive Growth
Fund. In August, 1996, the Board of Directors of Caldwell &
Orkin approved changing the name of the Aggressive Growth Fund to
the Caldwell & Orkin Market Opportunity Fund.
Caldwell & Orkin's address is: 2050 Tower Place, 3340
Peachtree Road, Atlanta, Georgia 30326, and its telephone number
is (404)239-0707.
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
Reference is made to "Investment Objectives and Policies" in
the Prospectus for a discussion of the investment objectives and
policies of the Fund. Set forth below is certain further
information relating to the Fund generally.
INVESTMENTS IN SMALL COMPANIES. Although the Fund invests
in companies of all sizes, there may be times when there is a
significant investment in small companies. Smaller growth
companies may offer greater potential for capital appreciation
than larger companies. Smaller growth companies usually have new
products or technologies, new distribution methods, rapid changes
in industry conditions due to regulatory or other developments,
changes in management or similar characteristics that may result
not only in the expected growth in revenues but in an accelerated
or above average rate of earnings growth, which would usually be
reflected in capital appreciation. In addition, because they may
be less actively followed by stock analysts and less information
may be available on which to base stock price evaluations, the
market may overlook favorable trends in particular smaller growth
companies, and then adjust its valuation more quickly once
investor interest is gained. Smaller growth companies may also
be more subject to a valuation catalyst (such as increased
investor attention, takeover efforts or change in management)
than larger companies.
On the other hand, the smaller companies in which the Fund
may invest may have relatively small revenues, may have a small
share of the market for their products or services, their
businesses may be limited to regional markets, or they may
provide goods or services for a limited market. For example,
they may be developing or marketing new products or services for
B-3
<PAGE>
which markets are not yet established and may never become
established or may have or develop only a regional market for
product or services and thus be affected by local or regional
market conditions. In addition, small companies may lack depth
of management or they may be unable to generate funds necessary
for growth or potential development, either internally or through
external financing on favorable terms. Such companies may also
be insignificant enough in their industries and become subject to
intense competition from larger companies. Due to these and
other factors, small companies may suffer significant losses or
realize substantial growth; therefore, investments in such
companies tend to be volatile and are more speculative.
INVESTMENTS IN SHORT SALES OF SECURITIES. The Fund may seek
to hedge investments or realize additional gains through short
sales. The Fund may make short sales, which are transactions in
which the Fund sells a security it does not own, in anticipation
of a decline in the market value of that security. To complete
such a transaction, the Fund must borrow the security to make
delivery to the buyer. The Fund is then obliged to replace the
security borrowed by purchasing it at the market price at or
prior to the time of replacement. The price at such time may be
more or less than the price at which the security was sold by the
Fund. Until the security is replaced, the Fund is required to
pay the lender any dividends or interest that accrue during the
period of the loan. To borrow the security, the Fund may also be
required to pay a premium, which would increase the cost of the
security sold. The net proceeds of the short sale will be
retained by the broker, to the extent necessary to meet margin
requirements, until the short position is closed out. The Fund
also will incur transaction costs in effecting short sales.
The Fund will incur a loss as a result of the short sale if
the price of the security increases between the date of the short
sale and the date on which the Fund replaces the borrowed
security. The Fund will realize a gain if the security declines
in price between those dates. The amount of any gain will be
decreased, and the amount of any loss increased by the amount of
the premium, dividends, interest or expenses the Fund may be
required to pay in connection with a short sale.
No securities will be sold short if, after effect is given
to any such sale, the total market value of all securities sold
short would exceed 25% of the Fund's net assets. The Fund
similarly will limit its short sales of securities of any single
issuer if the market value of the securities that have been sold
short by the Fund would exceed two percent (2%) of the value of
the Fund's net assets or if such securities would constitute more
than two percent (2%) of any class of the issuer's securities.
Whenever the Fund engages in short sales, its custodian
segregates an amount of cash or U.S. Government securities equal
to the difference between the market value of the securities sold
short at the time they were sold short and any cash or U.S.
Government securities deposited with the broker in connection
B-4
<PAGE>
with the short sale (not including the proceeds from the short
sale). The segregated assets are marked to market daily,
provided that at no time will the amount deposited in it plus the
amount deposited with the broker be less than the market value of
the securities at the time they were sold short.
In addition, the Fund may make short sales "against the box"
i.e., when a security identical to one owned by the Fund is
borrowed and sold short. If the Fund enters into a short sale
against the box, it is required to segregate securities
equivalent in kind and amount to the securities sold short (or
securities convertible or exchangeable into such securities) and
is required to hold such securities while the short sale is
outstanding. The Fund will incur transaction costs, including
interest, in connection with opening, maintaining, and closing
short sales against the box.
The Fund may only engage in short sale transactions in
securities listed on one or more national securities exchanges or
on NASDAQ.
INVESTMENTS IN FOREIGN SECURITIES. The Manager may invest
up to 25% of the Fund's assets in equity securities that are
issued by foreign issuers and are traded in the United States and
in American Depository Receipt of foreign companies. By doing
so, the Manager attempts to take advantage of differences between
economic trends and the performance of securities markets in
various countries. The Manager believes that it may be possible
to obtain significant appreciation from a portfolio consisting,
in part, of foreign investments and also achieve increased
diversification. Increased diversification is gained by
combining securities from various countries that offer different
investment opportunities and are affected by different economic
trends.
Generally, investments in securities of foreign companies,
except Canadian companies, involve greater risks than are present
in domestic investments. Canadian securities are not considered
by the Manager to have the same risks as other nations'
securities because Canadian and U.S. companies are generally
subject to similar auditing and accounting procedures and similar
governmental supervision and regulation. Also, Canadian
securities are normally more liquid than other non-U.S.
securities. Compared to U.S. and Canadian companies, there is
generally less publicly available information about foreign
companies and there may be less governmental regulation and
supervision of foreign stock exchanges, brokers and listed
companies.
In addition, investing in foreign securities also involves
the following considerations comprising both risks and
opportunities not typically associated with investing in U.S.
securities: fluctuations in exchange rates of foreign
currencies; possible imposition of exchange control regulation or
currency restrictions that would prevent cash from being brought
back to the U.S.; lack of uniform accounting, auditing, and
financial reporting standards; lack of uniform settlement periods
and trading practices; less liquidity and frequently greater
price volatility in foreign markets than in the U.S.; possible
B-5
<PAGE>
expropriation or nationalization of assets; and possible
imposition of foreign taxes. Furthermore, the U.S. government
has from time to time in the past imposed restrictions, through
taxation and otherwise, on foreign investments by U.S. investors
such as the Fund.
To the extent portfolio securities are denominated in
foreign currencies, the value of the assets of the Fund as
measured in U.S. dollars may be affected favorably or unfavorably
by changes in foreign currency exchange rates and exchange
control regulations. Although the Fund values its assets daily
in terms of U.S. dollars, it does not intend to convert its
holdings of foreign securities into U.S. dollars on a daily
basis.
LENDING OF PORTFOLIO SECURITIES. In order to generate
additional income, the Fund reserves authority to lend securities
from its portfolio to brokers, dealers and financial institutions
such as banks and trust companies and receive collateral in cash
or securities issued or guaranteed by the U.S. Government which
will be maintained in an amount equal to at least 100% of the
current market value of the loaned securities. The Fund may
experience a loss or delay in the recovery of securities if the
institution with which its has engaged in a portfolio loan
transaction breaches the agreement with the Fund. Income from
such lending will be invested in short-term cash equivalent
securities, which will increase the current income of the Fund.
Such loans will not be for more than 30 days and will be
terminable at any time. The Fund will have the right to regain
record ownership of loaned securities to exercise beneficial
rights such as rights to interest or other distributions. The
Fund may pay reasonable fees to persons unaffiliated with the
Fund for services in arranging such loans. With respect to
lending of portfolio securities, there is the risk of failure by
the borrower to return the securities involved in such
transactions, in which event the Fund may incur a loss. If the
Manager determines to make securities loans, the value of the
securities loaned would not exceed one third of the value of the
total assets of the Funds. The Fund does not presently intend to
lend its portfolio securities during the coming year.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase
agreements with "primary dealers" in U.S. government securities
and member banks of the Federal Reserve System which furnish
collateral at least equal in value or market price to the amount
of their repurchase obligation. In a repurchase agreement, the
Fund purchases a security from a seller which undertakes to
repurchase the security at a specified resale price on an agreed
future date (ordinarily a week or less). The resale price
generally exceeds the purchase price by an amount which reflects
an agreed-upon market interest rate for the term of the
repurchase agreement. The principal risk is that, if the seller
defaults, the Fund might suffer a loss to the extent that the
proceeds from the sale of the underlying securities and other
collateral held by the Fund in connection with the related
repurchase agreement are less than the repurchase price.
Repurchase agreements maturing in more than seven days are
considered by the Fund to be illiquid.
B-6
<PAGE>
INVESTMENT RESTRICTIONS
Caldwell & Orkin has adopted the following restrictions and
policies relating to the investment of its assets and its
activities, which are fundamental policies and may not be changed
without the approval of the holders of a majority of the Fund's
outstanding voting securities (which for this purpose and under
the Investment Company Act of 1940 means the lesser of (i) 67% of
the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the
outstanding shares).
Any investment restriction which involves a maximum
percentage of securities or assets shall not be considered to be
violated unless an excess over the percentage occurs immediately
after, and is caused by, an acquisition of securities or assets
of, or borrowings by, the Fund.
The Market Opportunity Fund may not:
1. As to 75% of its total assets, purchase securities of any one
issuer, other than those issued or guaranteed by the United
States government, its agencies or instrumentalities, if
immediately after such purchase more than 5% of the Market
Opportunity Fund's total assets would be invested in
securities of such issuer or the Market Opportunity Fund
would own 10% or more of the outstanding voting securities
of such issuer.
2. Invest 25% or more of its total assets in the
securities of issuers in any particular industry.
3. The Fund may not issue senior securities, except as
permitted under the Investment Company Act of 1940.
4. Make investments for the purpose of exercising control
or management.
5. Purchase securities of other investment companies,
except in connection with a merger, consolidation,
acquisition or reorganization.
6. Purchase or sell real estate or interests in real
estate, including real estate limited partnerships;
provided that the Market Opportunity Fund may invest in
securities secured by real estate or interests therein
or issued by companies, including real estate
investment trusts, which invest in real estate or
interests therein.
7. Purchase or sell commodities or commodity contracts,
including future contracts.
8. Purchase any securities on margin, except that the
Market Opportunity Fund may obtain such short-term
credit as may be necessary for the clearance of
purchases and sales of portfolio securities.
B-7
<PAGE>
9. Make loans to other persons; provided that the Market
Opportunity Fund may lend its portfolio securities, and
provided further that, for purposes of this
restriction, investment in Government obligations,
short-term commercial paper rated at least "A-2" by
Standard & Poor's Corporation or "Prime-2" by Moody's
Investors Service, Inc., certificates of deposit,
bankers' acceptances and repurchase agreements shall
not be deemed to be the making of a loan.
10. Borrow amounts in excess of 5% of its total assets,
taken at market value, and then only from banks as a
temporary measure for extraordinary or emergency
purposes such as the redemption of fund shares.
11. Mortgage, pledge, hypothecate or in any manner
transfer, as security for indebtedness, any securities
owned or held by the Market Opportunity Fund except as
may be necessary in connection with borrowings
mentioned in (10) above, and then such mortgaging,
pledging or hypothecating may not exceed 10% of the
Market Opportunity Fund's total assets, taken at market
value.
12. Invest more than 5% of the Market Opportunity Fund's
total assets in securities for which there are legal or
contractual restrictions on resale, securities which
are not readily marketable, securities of foreign
issuers which are not listed on a recognized domestic
or foreign securities exchange, or other illiquid
securities.
13. Underwrite securities of other issuers except insofar
as the Funds may be deemed an underwriter under the
Securities Act of 1933 in selling portfolio securities.
14. Write, purchase or sell puts, calls or combinations
thereof.
Additional investment restrictions adopted by the Directors
of the Market Opportunity Fund which may be changed by the
Directors at their discretion, provide that the Market
Opportunity Fund may not:
15. Purchase or sell interests in oil, gas or other mineral
exploration or development programs or leases. The
Market Opportunity Fund may, however, purchase or sell
securities of entities which invest in such programs.
16. Invest more than 5% of the value of its total assets in
marketable warrants to purchase common stock valued at
the lower of cost or market. Included within that
amount, but not to exceed 2% of the value of the Market
Opportunity Fund's net assets, may be warrants which
are not listed on the New York or American Stock
Exchanges. Warrants acquired by the Market Opportunity
Fund as part of a unit or attached to securities may be
deemed to be without value.
17. Engage in arbitrage transactions.
B-8<PAGE>
MANAGEMENT OF THE FUND
Reference is made to "Management of the Fund" in the
Prospectus. Set forth below is further information about the
Funds' management.
BOARD OF DIRECTORS
Listed below are the Directors of Caldwell & Orkin with
their principal occupations during the past five years. The
Directors of Caldwell & Orkin are responsible for the overall
supervision of the operations of the Funds. The Directors
perform the various duties imposed on the directors of investment
companies by the Investment Company Act of 1940, as amended (the
"Act"), and also have the responsibilities imposed generally on
directors of business corporations by General Corporation Law of
Maryland. Each Director whose name is followed by an asterisk is
an interested person of the Funds within the meaning of the Act.
H. EUGENE CALDWELL, DIRECTOR AND CHAIRMAN EMERITUS*
Gene Caldwell is 72 years old. He is the Chairman Emeritus
of Caldwell & Orkin, Inc., Mr. Caldwell was Senior Vice President
and Partner of Oppenheimer Capital Corporation from 1977-1986,
and prior to that was the founder and Chairman of Montag &
Caldwell. Mr. Caldwell is a Chartered Financial Analyst, a
Chartered Investment Counselor, and serves on the Board of
Visitors for Emory University. Mr. Caldwell's address is One
Habersham Way, N.W., Atlanta, Georgia 30305.
MICHAEL B. ORKIN, DIRECTOR, PRESIDENT, AND CHAIRMAN (See
information below.)*
FREDERICK T. BLUMER, DIRECTOR
Mr. Blumer is 38 years old and resides in Atlanta, Georgia.
He is the President of Blumer International, P.C. a law firm
specializing in corporate and international law. Prior to moving
to Atlanta, Mr. Blumer was a foreign legal Consultant with the
Oh-Ebashi Law Office in Osaka, Japan from 1985-1987. Before the
formation of Blumer International, P. C., Mr. Blumer practiced
law with the Atlanta law firm of Hurt, Richardson, Garner, Todd
and Cadenhead. He serves as corporate legal counsel and advisor
for both U.S. and foreign corporations. He speaks Japanese and
French. Mr. Blumer's address is Overlook I, Suite 380, 2849 Paces
Ferry Road, Northwest, Atlanta, Georgia 30339.
B-9
<PAGE>
DAVID L. EAGER, DIRECTOR
David Eager, who is 54 years old, has been President and
Managing Partner of Eager & Associates since July, 1985. Eager &
Associates is a management and marketing consulting firm located
in Louisville, Kentucky. In addition to managing the firm, Mr.
Eager consults on marketing strategies and product development.
Mr. Eager's address is 100 Mallard Creek Road, Louisville,
Kentucky 40207.
ROBERT H. GREENBLATT, DIRECTOR
Robert Greenblatt, who is 35 years old, has been an officer,
director and principal of Polaris Capital Management since
January, 1995. Polaris Capital Management is an investment
management firm specializing in tactical asset allocation. Mr.
Greenblatt was formerly Vice-President of Bankers Trust Global
Investment Management in New York. Mr. Greenblatt's address is
317 Madison Avenue, Suite 1124, New York, New York 10017.
HENRY H. PORTER, JR., DIRECTOR
Henry Porter, who is 62 years old, is a private investor and
a professional corporate director. He is a director of SEI
Corporation, Greenwich Associates and Pacific Investment
Management Corporation, and is an officer and director of several
other private corporations. He is a Trustee of Carleton College.
Mr. Porter's address is 5806 River Knolls, Louisville, Kentucky
40222.
OFFICERS
The principal executive officers of Caldwell & Orkin and
their principal occupations for at least the past five years are
set forth below. Unless otherwise noted, the address of each
executive officer is 2050 Tower Place, 3340 Peachtree Road,
Atlanta, Georgia 30326. No officer of the Fund was paid a salary
or other compensation by the Fund.
H. EUGENE CALDWELL - Chairman Emeritus* - Gene Caldwell is
72 years old. He is the Chairman Emeritus of Caldwell & Orkin,
Inc. Mr. Caldwell was Senior Vice President and Partner of
Oppenheimer Capital Corporation from 1977-1986, and prior to that
was Founder and Chairman of Montag & Caldwell. Mr. Caldwell is a
Chartered Financial Analyst, a Chartered Investment Counselor,
and serves on the Board of Visitors for Emory University. Mr.
Caldwell's address is 1 Habersham Way, N.W., Atlanta, Georgia
30305.
MICHAEL B. ORKIN - President* - Michael Orkin is 37 years
old. Mr. Orkin is the President and sole shareholder of Caldwell
& Orkin, Inc. where he has been a portfolio manager since 1985.
He is President, Chief Executive Officer and Chairman of the
Investment Policy Committee. Prior to his current position, he
was an assistant portfolio manager with Pacific Equity
Management, as well as an analyst for both Oppenheimer Capital
Corporation and Ned Davis Research. Mr. Orkin is a Chartered
Financial Analyst and a Chartered Investment Counselor.
B-10
<PAGE>
M. RAINEY REMBERT - Secretary* - Rainey Rembert is 34 years
old. Ms. Rembert has been the President of the Distributor
since 1989, Vice President - Trading, Caldwell & Orkin, Inc.
since 1987 and Operations Manager 1985 - 1987.
LISA J. BROOKS - Treasurer* - Lisa Brooks is 33 years old.
Ms. Brooks has been the Treasurer of the Manager since 1995;
Treasurer of the Distributor since 1995; Controller of Caldwell &
Orkin, Inc., the Manager's and Distributor's parent, since 1995;
Previously she was employed as Controller of Australian Body
Works, Inc. Ms. Brooks is a Certified Public Accountant.
_______________________
* Interested person of Caldwell & Orkin, as defined by the
Investment Company Act of 1940.
DIRECTORS
The Fund pays each Director who is not affiliated with the
Manager an annual fee of $5,000 per year plus $250 per meeting
attended, together with such directors' actual out-of-pocket
expenses relating to attendance at meetings. During fiscal year
1996, each director received $6,000.
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to "Management of the Fund--Management
Arrangement" in the Prospectus for certain information concerning
the management and advisory arrangements of the Fund.
Securities held by the Fund may also be held by other
clients of the Manager or its sole shareholder, Caldwell &
Orkin, Inc. ("C&O"). Securities may be held by or be appropriate
investments for the Fund as well as other clients of the Manager
or C&O. Because of different objectives or other factors, a
particular security may be bought for one or more clients when
one or more clients are selling the same security. If purchases
or sales of securities for the Funds or for its advisory clients
arise for consideration at or about the same time, transactions
in such securities will be made, insofar as feasible, for the
respective clients in a manner deemed equitable to all. To the
extent that transactions on behalf of more than one client of the
Manager or C&O during the same period may increase the demand for
securities being purchased or the supply of securities being
sold, there may be an adverse effect on price.
B-11
<PAGE>
The principal executive officers of the Manager are H.
Eugene Caldwell - Chairman Emeritus, Michael B. Orkin -
President, M. Rainey Rembert - Secretary and Lisa J. Brooks -
Treasurer. Mr. Orkin is the sole shareholder of C&O, of which
the manager is a wholly-owned subsidiary.
Management Fee. The Fund has entered into a Management
Agreement with the Manager. As discussed in the Prospectus, the
Manager shall receive monthly compensation at annual rates which
vary according to the total assets of the Fund.
On an annual basis, the advisory fee is equal to the
following for the Fund:
0.90% of average daily net assets up to $100 million; 0.80%
of average daily net assets in excess of $100 million but not
more than $200 million; 0.70% of average daily net assets in
excess of $200 million but not more than $300 million; 0.60% of
average average daily net assets in excess of $500 million.
Certain of the states in which the shares of the Fund may be
qualified for sale impose limitations on the operating expenses
of registered investment companies. The Management Agreement
provides that the Manager will reimburse the Fund to the extent
necessary to satisfy the most restrictive expense ratio permitted
by any state in which the Fund's shares are qualified for sale.
The Manager has agreed that, if no such state limitations are
applicable, it will reimburse the Fund monthly to the extent
necessary to prevent its annual ordinary operating expenses
(excluding taxes, brokerage commissions and extraordinary charges
such as litigation costs) from exceeding 2.0% of the Fund's
average net assets.
For the years ended April 30, 1996, 1995 and 1994, the Fund
paid $296,800, $231,748 and $97,046, respectively to the Manager
pursuant to its Management Agreement.
Payment of Expenses. The Management Agreement obligates the
Manager to provide management and investment advisory services
and to pay all compensation of and furnish office space for
officers and employees of the Fund connected with investment and
economic research, trading and investment management of the Fund,
as well as the fees of all directors for the Fund who are
affiliated persons of the Manager. (The Fund pays all other
expenses incurred in the operation of the Fund, including, among
other things, taxes, expenses for legal and auditing services,
costs of printing proxies, stock certificates, shareholder
reports, prospectuses and statements of additional information
(except to the extent paid by the Distributor), charges of the
custodian and transfer agent, expenses of redemption of shares,
Securities and Exchange Commission fees, expenses of registering
the shares under Federal and state securities laws, fees and
expenses of unaffiliated directors, accounting and pricing costs
(including the daily calculation of net asset value), insurance,
interest, brokerage costs, litigation and other extraordinary or
non-recurring expenses, and other expenses properly payable by
the Fund. Accounting and pricing services are provided to the
B-12
<PAGE>
Fund by the Manager and the Fund reimburses the Manager for its
costs in connection with such services. As required by the
Distribution Agreement, the Distributor will pay the promotional
expenses of the Fund incurred in connection with the offering of
shares of the Fund.
In addition to the Management Agreement with the Manager,
Caldwell & Orkin has entered into an agreement with C&O pursuant
to which C&O has granted to Caldwell & Orkin and the Fund the
right to use the name "Caldwell & Orkin" in their name. C&O has
reserved the right, however, upon 30 days written notice, to
terminate the right to such use should the Manager no longer
serve as Manager to the Fund or should the Management Agreement
be terminated. Under those circumstances, C&O has also reserved
the right to grant the right to use the name "Caldwell & Orkin"
to another investment company, business or other enterprise.
Duration and Termination. Unless earlier terminated as
described above, the Management Agreement will remain in effect
from year to year if approved annually (a) by the Board of
Directors of the Fund or by a majority of the outstanding shares
of the Fund and (b) by a majority of the Directors who are not
parties to such contract or interested persons (as defined in the
Investment Company Act of 1940) of any such party. Such contract
terminates automatically upon assignment and may be terminated
without penalty on 60 days written notice at the option of either
party thereto or by the vote of the shareholders of the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
Subject to policy established by the Board of Directors of
the Fund, the Manager is responsible for the Fund's portfolio
decisions, the placing of the Fund's portfolio transactions and
the negotiation of the commissions to be paid on such
transactions. In executing such transactions, the Manager will
use its best efforts to obtain the execution of portfolio
transactions at prices which are advantageous to the Fund and
involving commission rates which are reasonable in relation to
the value of the transaction.
The Fund has no obligation to deal with any broker or dealer
in the execution of transactions for its portfolio securities.
The Manager will select brokers or dealers taking into account
such factors as price (including the commission or spread), size
of order, difficulty of execution and operational facilities of
the firm involved and the firm's risk in positioning a block of
securities. The Manager will also consider the research services
which the broker or dealer has provided to the Manager relating
to the security involved in the transaction and/or to other
securities. Consistent with the Rules of Fair Practice of the
NASD and such other policies as the Board of Directors may
determine, the Fund may consider sales of shares of the Fund as a
factor in the selection of brokers or dealers to execute
portfolio transactions for the Fund.
B-13
<PAGE>
Under Section 28(e) of the Securities Exchange Act of 1934
and its Management Agreement with the Fund, the Manager is
authorized to pay a brokerage commission in excess of that which
another broker might have charged for effecting the same
transaction, in recognition of the value of brokerage and/or
research services provided by the broker. These research and
investment information services make available to the Manager for
its analysis and consideration the views and information of
individuals and research staffs of other securities firms. These
services may be useful to the Manager in connection with advisory
clients other than the Fund and not all such services may be
useful to the Manager in connection with the Fund. Although such
information may be a useful supplement to the Manager's own
investment information in rendering services to the Fund, the
value of such research and services is not expected to reduce
materially the expenses of the Manager in the performance of its
services under the Management Agreement and will not reduce the
management fees payable to the Manager by the Fund.
The Fund may invest in securities traded in the over-the-
counter market. Transactions in the over-the-counter market are
generally principal transactions with dealers and the costs of
such transactions involve dealer spreads rather than brokerage
commissions. The Fund, where possible, deals directly with the
dealers who make a market in the securities involved except in
those circumstances where better prices and execution are
available elsewhere. When a transaction involves exchange listed
securities, the Manager considers the advisability of effecting
the transaction with a broker which is not a member of the
securities exchange on which the security to be purchased is
listed (i.e., a third market transaction) or effecting the
transaction in the institutional or fourth market.
For the years ended April 30, 1996, 1995 and 1994, the Fund
paid $181,928, $109,490 and $79,365, respectively, in brokerage
commissions.
B-14
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined
as of 4:00 P.M. on each day during which The New York Stock
Exchange is open for trading. The New York Stock Exchange is not
open on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. The Fund will also determine its net asset value once daily
on each day (other than a day during which no shares were
tendered for redemption and no order to purchase or sell shares
was received by the Fund) in which there is sufficient trading in
its portfolio securities that the net asset value might be
materially affected. The net asset value per share is computed
by dividing the sum of the value of the securities held by the
Fund plus any cash or other assets (including interest and
dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of shares
outstanding at such time, rounded to the nearest cent. Expenses,
including the management fee payable to the Manager, are accrued
daily.
Equity securities listed or traded on a national securities
exchange or quoted on the over-the-counter market are valued at
the last sale price on the day the valuation is made or, if no
sale is reported, at the last bid price. Valuations of fixed
income securities are supplied by independent pricing services
approved by Caldwell & Orkin's Board of Directors. Money market
securities with a remaining maturity of 60 days or less are
valued on an amortized cost basis if their original term to
maturity from the date of purchase was 60 days or less, or by
amortizing their value on the 61st day prior to maturity, if
their term to maturity from the date of purchase exceeded 60
days, unless the Board of Directors determines that such
valuation does not represent fair value. Other assets and
securities for which market quotations are not readily available
are valued at fair value as determined in good faith by or under
the direction of Caldwell & Orkin's Board of Directors.
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" in the Prospectus.
Set forth below is further information about the purchase of
shares of the Fund.
PURCHASE BY EXCHANGE OF SECURITIES. The Board of Directors
of Caldwell & Orkin has determined that it is in the best
interest of the Fund to offer its shares, in lieu of cash
payment, for securities approved by the Manager to be purchased
by the Fund. This will enable an investor to purchase shares of
the Fund by exchanging securities owned by the investor for
shares of the Fund. The Directors believe that such a
transaction can benefit the Fund by allowing it to acquire
securities for its portfolio without paying brokerage
commissions. For the same reason, the transaction may also be
beneficial to investors. Securities will be exchanged for shares
of any of the Funds all in the absolute discretion of the
B-15
<PAGE>
Manager. Cash equivalent securities may be contributed to the
Fund in accordance with the wishes of the investor and the
consent of the Manager. The exchange of securities in an
investor's portfolio for shares of any of the Funds is treated
for federal income tax purposes as a sale of such securities and
the investor may, therefore, realize a taxable gain or loss.
The Fund shall not enter into such transactions, however,
unless the securities to be exchanged for Fund shares are
securities whose values are readily ascertainable and are readily
marketable, comply with the investment policies of the Fund, are
of the type and quality which would normally be purchased for the
Fund's portfolio, are securities which the Fund would otherwise
purchase, and are acquired for investment and not for immediate
resale. The value of the Fund's shares used to purchase
portfolio securities as stated herein will be determined at such
time as the Fund next determines its net asset value. Such
securities will be valued in accordance with the same procedure
used in valuing the Fund's portfolio securities. (See
"Determination of Net Asset Value.") If you wish to acquire the
Fund's shares in exchange for securities you should contact C & O
Funds Distributor, Inc. at the address or telephone number shown
on the cover page of the Prospectus. The Board of Directors of
Caldwell & Orkin reserves the right to terminate this privilege
at any time.
THE DISTRIBUTOR
Reference is made to "The Distributor" in the Prospectus.
Set forth below is further information about the Distributor and
the Fund's Distribution Agreement.
The Fund has entered into Distribution Agreement with C & O
Funds Distributor, Inc. (the "Distributor"). The Agreement
obligates the Distributor to pay certain expenses in connection
with the offering of the shares of the Fund. After the
prospectus, statement of additional information and periodic
reports have been prepared and mailed to current shareholders,
the Distributor pays for the printing and distribution of copies
thereof used in connection with the offering to dealers and
prospective investors. The Distributor also pays for other
supplementary sales literature and advertising costs.
The Distribution Agreement will remain in effect from year
to year but only so long as such continuance is approved at least
annually by a vote of the Directors of Caldwell & Orkin or by
vote of a majority of the outstanding voting securities of the
Fund and of the Directors who, except for their positions as
Directors of Caldwell & Orkin, are not "interested persons" of
Caldwell & Orkin (as defined in the Investment Company Act). In
addition, either party may terminate the Agreement upon 60 days
written notice and they terminate automatically if "assigned" (as
defined in the Investment Company Act). The Distribution
Agreement is subject to the same renewal requirements and
termination provisions as the Management Agreement described
under "Management of the Fund - Management Arrangement."
B-16
<PAGE>
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the
Prospectus for certain information as to the redemption of shares
of the Fund.
The right to redeem shares or to receive payment with
respect to any such redemptions may be suspended for more than
seven days only for periods during which trading on the New York
Stock Exchange is restricted as determined by the Securities and
Exchange Commission or such Exchange is closed (other than
customary weekend and holiday closings), or any period during
which an emergency exists, as defined by the Securities and
Exchange Commission, as a result of which disposal of portfolio
securities or determination of the net asset value of the Fund is
not reasonably practicable, and for such other periods as the
Securities and Exchange Commission may by order permit for the
protection of shareholders of the Fund.
The Fund has made an election with the Securities and
Exchange Commission to pay in cash all redemptions requested by
any shareholder of record limited in amount during any 90-day
period to the lesser of $250,000 or 1% of the net assets of the
Fund at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and
Exchange Commission. Redemptions in excess of the above limits
may be paid in whole or in part, in investment securities or in
cash, as the Board of Directors may deem advisable; however,
payment will be made wholly in cash unless the Board of Directors
believes that economic or market conditions exist which would
make such a practice detrimental to the best interests of the
Fund. If redemptions are paid in investment securities, such
securities will be valued as set forth in the Prospectus under
"Determination of Net Asset Value" and a redeeming shareholder
would normally incur brokerage expenses if he converted these
securities to cash.
The Fund will generally first sell any cash equivalent
securities it holds to meet redemptions and, to the extent these
proceeds are insufficient to meet redemptions, the Fund will sell
other portfolio securities at the discretion of the Manager. See
"Redemption of Shares" in the Prospectus.
The value of shares at the time of redemption may be more or
less than the shareholder's cost, depending on the market value
of the securities held by the Fund at such time.
SHAREHOLDER SERVICES
The Fund offers the following shareholder services designed
to facilitate investment in its shares.
B-17
<PAGE>
INVESTMENT ACCOUNT. Each shareholder has an Investment
Account and will receive statements from the Fund's Transfer
Agent after each transaction showing the cumulative activity in
the account since the beginning of the year. After the end of
each year, shareholders will receive federal income tax
information regarding dividends and capital gains distributions.
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTION.
Unless specific instructions are given as to the method of
payment of dividends and capital gains distributions, dividends
and distributions will automatically be reinvested in additional
shares of the Fund. Such reinvestment will be at the net asset
value of shares of the Fund, without sales charge, as of the
close of business on the ex-dividend date of the dividend or
distribution. Shareholders may elect in writing to receive
either their income dividends or capital gains distributions, or
both, in cash, in which event payment will be mailed on the
payment date.
Shareholders may, at any time, notify the Transfer Agent in
writing that they no longer wish to have their dividends and/or
distributions reinvested in shares of the Funds or vice versa
and, commencing ten days after the receipt by the Transfer Agent
of such notice, those instructions will be effected.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to distribute
all of its net investment income and net realized long- or short-
term capital gains, if any, to its shareholders annually after
the close of the Fund's fiscal year. See "Shareholder Services-
Reinvestment of Dividends and Capital Gains Distributions" for
information concerning the manner in which dividends and
distributions may be automatically reinvested in shares of the
Fund. Shareholders may elect in writing to receive any such
dividends or distributions, or both, in cash. Dividends and
distributions are taxable to shareholders as discussed below
whether they are reinvested in shares of the Fund or received in
cash.
TAXES. The Fund intends to elect to qualify for the special
tax treatment afforded regulated investment companies under the
Internal Revenue Code of 1986, as amended (the "Code"). If it so
qualifies, the Fund will not be subject to federal income tax on
the part of its net ordinary income and net realized capital
gains which it distributes to shareholders.
Dividends paid by the Fund from its ordinary income, and
distributions of the Fund's net realized short-term capital
gains, are taxable to non-tax-exempt investors as ordinary
income. Distributions made from the Fund's net realized long-
term capital gains are taxable to shareholders as long-term
capital gains regardless of the length of time the shareholder
has owned Fund shares. Ordinary income dividends may be eligible
for the 70% dividends received deduction allowed to corporations
under the Code, if certain requirements are met.
B-18
<PAGE>
Upon redemption of Fund shares held by a non-tax-exempt
investor, such investor, generally, will realize a capital gain
or loss equal to the difference between the redemption price
received by the investor and the adjusted basis of the shares
redeemed. If the redemption by the Fund is in-kind, capital gain
or loss will be measured by the difference between the fair
market value of securities received and the adjusted basis of the
shares redeemed. Such capital gain or loss, generally, will
constitute a short-term capital gain or loss if the redeemed Fund
shares were held for twelve months or less, and long-term capital
gain or loss if the redeemed Fund shares were held for more than
twelve months. If, however, Fund shares were redeemed within six
months of their purchase by an investor, and if a capital gain
dividend was paid with respect to the Fund's shares while they
were held by the investor, then any loss realized by the investor
will be treated as long-term capital loss to the extent of the
capital gain dividend.
Under certain provisions of the Code, some shareholders may
be subject to 31% withholding on reportable dividends, capital
gains distributions and redemption payments ("back-up
withholding"). Generally, shareholders subject to back-up
withholding will be those for whom a taxpayer identification
number is not on file with the Fund or who, to such Fund's
knowledge, have furnished an incorrect number. When establishing
an account, an investor must certify under penalty of perjury
that such number is correct and that he is not otherwise subject
to back-up withholding.
Dividends paid by the Fund from its ordinary income and
distributions of the Fund's net realized short-term capital gains
paid to shareholders who are non-resident aliens will be subject
to a 30% United States withholding tax under existing provisions
of the Code applicable to foreign individuals and entities unless
a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Non-resident shareholders
are urged to consult their own tax advisers concerning the
applicability of the United States withholding tax.
The Code requires each regulated investment company to pay a
nondeductible 4% excise tax to the extent the company does not
distribute, during each calendar year, 98% of its ordinary
income, determined on a calendar year basis, and 98% of its
capital gains, determined, in general, on an October 31 year-end,
plus any undistributed amount from prior years. The Fund
anticipates that it will make sufficient timely distributions to
avoid imposition of the excise tax. If the Fund pays a dividend
in January which was declared in the previous October, November
or December to shareholders of record on a date in those months,
then such dividend or distribution will be treated for tax
purposes as being paid on December 31 and will be taxable to
shareholders as if received on December 31.
The foregoing is a general and abbreviated summary of the
applicable provisions of the Code and Treasury regulations
presently in effect. For the complete provisions, reference
should be made to the pertinent Code sections and the Treasury
regulations promulgated thereunder. The Code and these Treasury
regulations are subject to change by legislative or
administrative action.
B-19
<PAGE>
Dividends and capital gains distributions may also be
subject to state and local taxes.
The federal income tax consequences set forth above do not
address any particular tax considerations a shareholder of the
Fund might have. Shareholders are urged to consult their tax
advisors as to the particular tax consequences of the
acquisition, ownership and disposition of shares of the Fund,
including the application of state, local and foreign tax laws
and possible future changes in federal tax laws. Foreign
investors should consider applicable foreign taxes in their
evaluation of an investment in the Fund.
PERFORMANCE INFORMATION
As stated in the Prospectus, from time to time the Fund may
provide its total return in advertisements, sales literature or
reports, and other communications to shareholders. The Fund's
total return is calculated based on the Fund's change in net
asset value per share between the beginning and end of the period
shown and assumes reinvestment of the Fund's dividend and capital
gains distributions during the period.
Total return figures will be computed according to a formula
prescribed by the Securities and Exchange Commission. The
formula can be expressed as follows:
P(1+T)n = ERV
Where P = a hypothetical initial payment of $10,000
T = average annual total return
N = number of years
ERV = Ending Redeemable Value of a hypothetical $10,000
payment made at the beginning of the 1, 5, or 10
years (or other) periods at the end of the 1, 5,
or 10 (or other) periods (or fractional
portion thereof);
The ERV assumes complete redemption of the hypothetical
investment at the end of the measuring period. The Fund's net
investment income changes in response to fluctuations in interest
rates, dividends declared and the expenses of the Fund.
B-20
<PAGE>
The following table provides the total rates of return for
the Caldwell & Orkin Market Opportunity Fund from its inception
to April 30, 1996. These rates of return are net of all expenses
and assume all dividends and distributions by the Market
Opportunity Fund have been reinvested on the reinvestment dates
during each period. In addition, all recurring fees charged to
all shareholder accounts are included.
<TABLE>
<CAPTION>
<S> <C>
1 Year (April 30, 1995-April 30, 1996) 31.8257%
3 Years (April 30, 1993-April 30, 1996) 14.4850%
5.1 Years Since Inception (March 11, 1991-April 30, 1996) 13.9636%
</TABLE>
Based on the rates of return listed above, you could have expected
the following redeemable values on a $10,000 investment assuming
reinvestment of all dividends and capital gains and redemption at the end
of each time period:
<TABLE>
<CAPTION>
Value Return
----- ------
<S> <C> <C>
1 Year (April 30, 1995-April 30, 1996) $13,182.57 $3,182.57
3 Years (April 30, 1993-April 30, 1996) $15,005.35 $5,005.35
5.1 Years Since Inception (March 11, 1991-April 30, 1996) $19,576.44 $9,576.44
</TABLE>
Effective August 24, 1992, the Market Opportunity Fund changed
investment objectives to capital growth and capital preservation through
active investment selection and allocation. Prior to that time, the
Fund's objective was to obtain, in a passive way, a long-term total
return (capital growth plus income) reflecting the performance of the 100
largest industrial common stocks listed on the NASDAQ National Market
System by investing, with limited exemptions, in those 100 stocks.
The following table provides the total rates of return for the
Market Opportunity Fund from August 24, 1992, the date on which the
Market Opportunity Fund changed its investment objectives and policies,
to April 30, 1996. These rates of return are net of all expenses and
assume all dividends and distributions by the Market Opportunity Fund
have been reinvested on the reinvestment dates during each period. In
addition, all recurring fees charged to all shareholder accounts are
included.
<TABLE>
<CAPTION>
<S> <C>
1 Year (April 30, 1995-April 30, 1996) 31.8257%
3 Years (April 30, 1993-April 30, 1996) 14.4850%
3.7 Years Since Commencement of Hedged Management Style
(August 24, 1992-April 30, 1996) 17.5474%
</TABLE>
B-22<PAGE>
Based on the rates of return listed above, you could have expected
the following redeemable values on a $10,000 investment assuming
reinvestment of all dividends and capital gains and redemption at the end
of each time period:
<TABLE>
<CAPTION>
Value Return
----- ------
<S> <C> <C>
1 Year (April 30, 1995-April 30, 1996) $13,182.57 $3,182.57
3 Years (April 30, 1993-April 30, 1996) $15,005.35 $5,005.35
5.1 Years Since Inception (March 11, 1991-April 30, 1996) $18,170.63 $8,170.63
</TABLE>
There may be a time when the Fund advertises its "yield." Yield
figures are based on historical earnings and, like the rate of return,
are not intended to indicate future performance. The yield of the Fund
refers to the income generated by an investment in the Fund over a
thirty-day (or one month) period (which period will be stated in the
advertisement). The yield for any 30-day (or one month) period is
computed by dividing the net investment income per share earned during
such period by the maximum public offering price per share on the last
day of the period, and then annualizing such 30-day (or one month) yield
in accordance with a formula prescribed by the Securities Exchange
Commission. The Fund may also advertise in terms of sales literature an
"actual distribution" which is computed in the same manner as yield
except that actual income dividends declared per share during the period
in question is substituted for net investment income per share. The
Fund's yield will only be advertised when accompanied by the Fund's total
return.
The Fund's performance will vary from time to time depending upon
market conditions, the composition of its portfolio and its operating
expenses. Consequently, any given performance quotation should not be
considered representative of the Fund's performance for any specified
period in the future. In addition, because performance will fluctuate,
it may not provide a basis for comparing an investment in the Fund with
certain bank deposits or other investments that pay a fixed yield for a
stated period of time.
GENERAL INFORMATION
DESCRIPTION OF SHARES. Caldwell & Orkin was incorporated
under Maryland law on August 15, 1989. It has an authorized
capital of 45,000,000 shares of Common Stock, par value $0.10 per
share, 15,000,000 shares of which have been classified as shares
of Market Opportunity Fund common stock. The Board of Directors
has the power to authorize and issue additional classes of stock,
without stockholder approval, by classifying or reclassifying
unissued stock, subject to the requirements of the Act. In the
event of liquidation, each share of Common Stock is entitled to a
pro rata portion of the particular Fund's assets after payment of
debts and expenses. Shareholders of each Fund are entitled to
B-22<PAGE>
one vote for each share held and fractional votes for fractional
shares held and will vote on the election of Directors and any
other matter submitted to a shareholder vote. In addition,
Shareholders have the right to remove Directors. The Funds do
not intend to hold meetings of shareholders in any year in which
the Act does not require shareholders to act upon any of the
following matters: (i) election of Directors; (ii) approval of
an investment advisory agreement; (iii) approval of a
distribution agreement; and (iv) ratification of selection of
independent auditors. Voting rights for Directors are not
cumulative. Shares issued are fully paid and non-assessable and
have no preemptive or conversion rights.
PRINCIPAL SHAREHOLDERS. As of July 31, 1996 the following
entities were known by the Market Opportunity Fund to be record
and beneficial owners of five percent or more of the outstanding
stock of the Market Opportunity Fund:
<TABLE>
<CAPTION>
Name and Address of Number of Percent
Beneficial Owner Shares of Class
- ------------------- --------- --------
<S> <C> <C> <C>
Mr. Sanford H. Orkin 343,504.728 15.16%
234 Monarch Plaza
3414 Peachtree Road
Atlanta, Georgia 30326
Charles Schwab & Co., Inc. 312,970.920 13.82%
Special Custody A/C FBO Customers
101 Montgomery Street
San Francisco, California 94104
Mr. William B. Orkin 168,740.145 7.45%
Orkin & Associates
6100 Lake Forrest Drive
Suite 280
Atlanta, Georgia 30328
Mr. Bennett N. Oxman 120,256.598 5.31%
2660 Peachtree Road, N.W.
#26D
Atlanta, Georgia 30305
</TABLE>
As of July 31, 1996, the officers and directors of Caldwell &
Orkin and the Manager, as a group, own 10.63% of the outstanding
shares of the Fund.
INDEPENDENT AUDITORS. Coopers & Lybrand, L.L.P. has been
selected as the independent auditors of the Fund. The
independent auditors are responsible for auditing the financial
statements of the Fund.
B-23
<PAGE>
CUSTODIAN. Bank One Ohio Trust Co., N.A., the principal
address of which is Brooksedge 8, Columbus, Ohio 43271-0393 acts
as Custodian of the Fund's assets. The Custodian is responsible
for safeguarding and controlling the Fund's cash and securities,
handling the delivery of securities and collecting interest on
the Fund's investments.
TRANSFER, REDEMPTION, AND DIVIDEND DISBURSING AGENT. MGF
Services Corporation, Cincinnati, Ohio, acts as the Fund's
Transfer, Redemption and Dividend Disbursing Agent. The Transfer
Agent is responsible for the issuance, transfer and redemption of
shares and the operating, maintenance and servicing of
shareholder accounts.
LEGAL COUNSEL. Kilpatrick & Cody, L.L.P. has been selected
as counsel for the Fund. Kilpatrick & Cody, L.L.P. will pass on
legal matters for the Fund in connection with the offering of its
shares. Kilpatrick & Cody, L.L.P. also represents the Manager
and the Distributor and will pass on legal matters for them in
connection with the offering of the Fund's shares.
REPORTS TO SHAREHOLDERS. The fiscal year of the Fund ends
on April 30 of each year. The Fund sends to its shareholders at
least semi-annually reports showing the Fund's portfolio and
other information. An annual report, containing financial
statements audited by independent auditors, is sent to
shareholders each year.
ADDITIONAL INFORMATION. The Prospectus and this Statement
of Additional Information do not contain all the information set
forth in the Registration Statement and the exhibits relating
thereto, which Caldwell & Orkin has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, to which
reference is hereby made.
FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT. The
audited financial statements of the Market Opportunity Fund are
incorporated by reference from the Market Opportunity Fund's
Annual Report to Shareholders for the fiscal year ended April 30,
1996. A copy of such report accompanies this Statement of
Additional Information. Additional copies are available, without
charge, by calling the Fund.
B-24<PAGE>
APPENDIX A
Ratings of Corporate Debt Obligations
The characteristics of debt obligations rated by Moody's are
generally as follows:
Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities of fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A - Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Baa - bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during other good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics
of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
B-1
<PAGE>
Ca - Bonds which are rated Ca represent obligations which
are speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
The characteristics of debt obligations rated by Standard &
Poor's are generally as follows:
AAA - This is the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely strong
capacity to pay principal and interest.
AA - Bonds rated AA also qualify as high quality debt
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from AAA
issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
BB, B, CCC, CC - Debt rated BB, B, CCC or CC is regarded, on
balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of
the obligation. BB indicates the lowest degree of speculation
among obligations rated lower than BBB and CC the highest degree
of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C - This rating is reserved for income bonds on which no
interest is being paid.
A bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
Ratings of Commercial Paper
The Funds' purchases of commercial paper are limited to
those instruments rated A-1 or A-2 by Standard & Poor's or Prime-
1 or Prime-2 by Moody's.
Commercial paper rated A-1 or A-2 by Standard & Poor's has
the following characteristics: liquidity ratios are adequate to
meet cash requirements; the issuer's long-term debt is rated "A"
or better; the issuer has access to at least two additional
channels of borrowing; and basic earnings and cash flow have an
up and down trend with allowances made for unusual circumstances.
Typically, the issuer's industry is well-established and the
issuer has a strong position within the industry. Relative
B-2
<PAGE>
strength or weakness of the above factors determines whether an
insurer's commercial paper is rated A-1 or A-2, with the relative
degree of safety of commercial paper rated A-2 not being as high
as for commercial paper rated A-1.
Commercial paper rated Prime-1 or Prime-2 by Moody's is the
highest commercial paper rating assigned by Moody's. Among the
factors considered by Moody's in assigning ratings are the
following: (1) evaluation of management of the issuer;
(2) economic evaluation of the issuer's industry or industries
and an appraisal of speculative-type risks which may be inherent
in certain areas; (3) evaluation of the issuer's products in
relation to competition and consumer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and
preparations to meet such obligations. Relative strength or
weakness of the above factors determine how the issuer's
commercial paper is rated within various categories.
A commercial paper rating is not a recommendation to
purchase, sell or hold a particular instrument, inasmuch as it
does not comment as to market price or suitability for a
particular investment.
B-3
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
----------------------------------
FINANCIAL STATEMENTS OF THE MARKET OPPORTUNITY FUND
INCORPORATED BY REFERENCE IN PART B:
Annual Report to Shareholders for year ended April 30, 1996:
Independent Auditors' Report
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Exhibits:
Exhibit
Number
-------
1.a. Amended and Restated Articles of Incorporation of
Registrant.****
b. Articles of Amendment
2. By-Laws of Registrant.**
3. None.
4. Specimen certificate for shares of common stock of
Registrant.*
5. Management Agreement between the Market
Opportunity Fund of Registrant and C & O Funds Advisor,
Inc. dated August 20, 1992.*****
6. Form of Distribution Agreement Registrant and C & O
Funds Distributor, Inc. dated August 20, 1992.*****
7. None.
8a. Custodian Agreement between Registrant and Bank One
Trust Company, N.A. dated September 5, 1990.***
C-1<PAGE>
8b. First Amendment to Custodian Agreement
between Registrant and Bank One Trust Company,
N.A.*****
9a. Transfer Agency Agreement between Registrant
and MGF Services Corp. dated March 3, 1995.*****
b. Agreement between Registrant and Caldwell &
Orkin, Inc. dated August 20, 1992.****
10. Opinion and consent of counsel, as to legality of
shares.*****
11. Consent of independent auditors.
12. None.
13. Agreement concerning initial capital of
Registrant (Market Opportunity Fund).*
14. None.
15a. Distribution Plan of Market Opportunity Fund of
the Registrant.*
b. Form of Distribution Plan Sub-Agreement.*
16. Schedule for Computation of performance
quotation.*****
27. Financial Data Schedule
18. Power of Attorney appointing H. Eugene Caldwell and
Michael B. Orkin (see Signature Page to this Amend-
ment).******
_______________
* Previously filed on May 30, 1990 in connection with
Registrant's initial Registration Statement on Form N-1A.
** Previously filed on August 8, 1990 in connection with
Registrant's Pre-Effective Amendment No. 1 to its Registration
Statement on Form N-1A.
*** Previously filed on December 24, 1990 in connection with
Registrant's Pre-Effective Amendment No. 2 to its Registration
Statement on Form N-1A.
**** Previously filed on June 25, 1992 in connection with
Registrant's Post-Effective Amendment No. 2 to its Registration
Statement on Form N-1A.
C-2
<PAGE>
***** Previously filed on August 21, 1992 in connection with
Registrant's Post-Effective Amendment No. 3 to its Registration
Statement on Form N-1A.
****** Previously filed on August 29, 1994 in connection with
Registrant's Post-Effective Amendment No. 6 to its Registration
Statement on Form N-1A.
******* Previously filed on June 30, 1995 in connection with
Registrant's Post-Effective Amendment No. 7 to its Registration
Statement on Form N-1A.
Item 25. Persons Controlled by or under Common
Control with Registrant.
------------------------
C & O Funds Advisor, Inc., the Funds' Manager, and
C & O Funds Distributor, Inc., the Funds' Distributor, both of
which are Georgia corporations, are wholly-owned subsidiaries of,
and may be deemed to be controlled by, Caldwell & Orkin, Inc.
Item 26. Number of Holders of Securities.
--------------------------------
Number of Record
Holders at
Title of Class August 20, 1996
-------------- ---------------
Market Opportunity Fund Common Stock 147
Item 27. Indemnification.
---------------
Section 2-418 of the General Corporation Law of the State of
Maryland, Article VI of Registrant's Charter filed as Exhibit 1,
Article VII of Registrant's By-Laws filed as Exhibit 2, and the
Distribution Agreement filed as Exhibit 6 provide, or will
provide, for indemnification.
Registrant's Articles of Incorporation (Article VI) provide
that Registrant shall indemnify its directors and officers to the
fullest extent permitted by law.
Registrant's By-laws (Article VII, Section 1) provide that
Registrant shall indemnify any director and/or officer who was or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is
C-3<PAGE>
or was a director or officer of Registrant, or is or was serving
at the request of Registrant as a director or officer of another
corporation, partnership, joint venture, trust or other enter-
prise, against all expenses (including attorneys' fees), judg-
ments, fines and amounts paid in settlement actually and reason-
ably incurred by him in connection with such action, suit or
proceeding to the maximum extent permitted by law.
With respect to indemnification of officers and directors,
Section 2-418 of the Maryland General Corporation Law provides
that a corporation may indemnify any director who is made a party
to any threatened, pending or completed action, suit or proceed-
ing, whether civil, criminal, administrative or investigative
(other than an action by or in the right of Registrant) by reason
of service in that capacity, or is or was serving at the request
of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement and expenses
actually and reasonably incurred by him in connection with such
action, suit or proceeding unless (1) it is established that the
act or omission of the director was material to the matter giving
rise to the proceeding, and (a) was committed in bad faith or
(b) was the result of active and deliberate dishonesty; or
(2) the director actually received an improper personal benefit
of money, property, or services; or (3) in the case of any
criminal action or proceeding, had reasonable cause to believe
that the act or omission was unlawful. A court of appropriate
jurisdiction may, however, except in proceedings by or in the
right of Registrant or in which liability has been adjudged by
reason of the person receiving an improper personal benefit,
order such indemnification as the court shall deem proper if it
determines that the director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances,
whether or not the director has met the requisite standard of
conduct. Under Section 2-418, Registrant may also indemnify
officers, employees and agents of Registrant who are not
Directors to the same extent that it shall indemnify directors
and officers, and to such further extent, consistent with law, as
may be provided by general or specific action of the Board of
Directors or contract. Pursuant to Section 2-418 of the Maryland
General Corporation Law, the termination of any proceeding by
judgment, order or settlement does not create a presumption that
the person did not meet the requisite standard of conduct
required by Section 2-418. The termination of any proceeding by
conviction, or a plea of nolo contendere or its equivalent, or an
entry of an order of probation prior to judgment, creates a
rebuttable presumption that the person did not meet the requisite
standard of conduct.
Reference is also made to Section 9 of the Distribution
Agreement filed as Exhibit 6 to this Registration Statement.
Section 9 of the Distribution Agreement provides that Registrant,
subject to certain conditions and limitations, shall indemnify,
defend and hold harmless the Underwriter, its officers and
directors and any person who controls the Underwriter within the
meaning of the Securities Act of 1933 from and against any and
all claims, demands, liabilities and expenses which they may
C-4
<PAGE>
incur under the Federal securities laws, the common law or
otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration
Statement or any related Prospectus and/or Statement of
Additional Information or arising out of or based upon any
alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading.
Reference is also made to Article IV of the Management
Agreement filed as Exhibit 5 to this Registration Statement.
Article IV provides that the Manager shall not be liable for any
error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the management of
the Registrant, except for willful misfeasance, bad faith or from
negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties under the
Management Agreement.
The Registrant may purchase insurance on behalf of an
officer or director protecting such person to the full extent
permitted under the General Laws of the State of Maryland, from
liability arising from his activities as officer or director of
the Registrant. The Registrant, however, may not purchase
insurance on behalf of any officer or director of the Registrant
that protects or purports to protect such person from liability
to the Registrant or to its shareholders to which such officer
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, reckless disregard of the duties
involved in the conduct of his office, active or deliberate
dishonesty, receipt of an improper personal benefit, or in the
case of a criminal proceeding that such person had reasonable
cause to believe the act or omission was unlawful. The
corporation may provide similar protection, including a trust
fund, letter of credit, or surety bond, not inconsistent with
this section. Insurance or similar protection may also be
provided by a subsidiary or affiliate of the corporation.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
None.
Item 29. Principal Underwriters.
----------------------
a. None.
b. Set forth below is information concerning each director and
officer of the Distributor. The principal business address
of the Distributor and each such person is 2050 Tower Place,
3340 Peachtree Road, Atlanta, Georgia 30326.
C-5
<PAGE>
<TABLE>
<CAPTION>
(1) (2) (3)
Position and Offices Positions and Offices
Name with Underwriter With Registrant
---- -------------------- ----------------------
<S> <C> <C>
M. Rainey Rembert President Secretary
Lisa J. Brooks Treasurer Treasurer
H. Eugene Caldwell None Director and Chairman
of the Board of Directors
Michael B. Orkin Director President and Director
</TABLE>
Item 30. Location of Accounts and Records.
---------------------------------
Registrant maintains the records required to be
maintained by it under Rules 31a-1(a), 31a-1(b) and 31a-2(a)
under the Investment Company Act of 1940 at its principal
executive offices at 2050 Tower Place, 3340 Peachtree Road,
Atlanta, Georgia, 30326. Certain records, including records
relating to Registrant's stockholders and the physical possession
of its securities, may be maintained pursuant to Rule 31a-3 at
the offices of Registrant's Custodian, Bank One Ohio Trust
Company, N.A., Brooksedge 8 Columbus, Ohio 43271-0393, and
Transfer Agent, MGF Service Corp., 312 Walnut Street, Cincinnati,
Ohio 45202.
Item 31. Management Services.
-------------------
None.
Item 32. Undertakings.
------------
The Registrant undertakes that, whenever ten or more
stockholders of record who have been such for at least six
months, and who hold in the aggregate either shares having a net
asset value of at least $25,000 or at least 1 per centum of the
outstanding shares, whichever is less, apply in writing to the
Registrant stating their intent to obtain signatures to request a
meeting for the purpose of removing any or all of Registrant's
Directors, the Registrant will either afford to the stockholders
making such application access to a list of the names and
addresses of all stockholders as recorded on the books of the
C-6
<PAGE>
Registrant or inform the stockholders making the application as
to the appropriate number of stockholders of record, and the
approximate cost of mailing to them any proposed solicitation
material and will, upon receipt of the solicitation material and
the reasonable expenses of mailing, mail such material to all
stockholders of record at their addresses as recorded on the
books of the Registrant, unless the Registrant's directors find,
in their opinion, that the materials contain material untrue
statements of fact or omit to state facts necessary to make the
statements contained therein not misleading, or would be in
violation of applicable law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant and the principal
underwriter pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant and the principal
underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted by such director, officer
or controlling person or the principal underwriter in connection
with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
C-7<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta,
and State of Georgia, on the 29th day of August, 1996.
THE CALDWELL & ORKIN FUNDS, INC.
(Registrant)
By: /s/__________________
Michael B. Orkin
President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ------ ----
<S> <C> <C>
H. Eugene Caldwell* Chairman
H. Eugene Caldwell Emeritus of
the Board
of Directors August 29, 1996
/s/_____________ Chairman,
Michael B. Orkin Director and
President August 29, 1996
Lisa J. Brooks* Treasurer
Lisa J. Brooks (Principal
Financial and
Accounting
Officer August 29, 1996
C-8
<PAGE>
David L. Eager* Director August 29, 1996
David L. Eager
____________________ Director August 29, 1996
Robert H. Greenblatt
Henry H. Porter, Jr.* Director August 29, 1996
Henry H. Porter, Jr.
Frederick T. Blumer* Director August 29, 1996
Frederick T. Blumer
* By: /s/_______________ August 29, 1996
Michael B. Orkin
Attorney-in-Fact
</TABLE>
C-9
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
- -------
1.a. Amended and Restated Articles of Incorporation of Registrant.****
b. Articles of Amendment
2. By-Laws of Registrant.**
3. None.
4. Specimen certificate for shares of common stock of Registrant.*
5. Management Agreement between the Market Opportunity Fund of
Registrant and C & O Funds Advisor, Inc. dated
August 20, 1992.*****
6. Form of Distribution Agreement Registrant and C & O Funds
Distributor,Inc. dated August 20, 1992.*****
7. None.
8a. Custodian Agreement between Registrant and Bank One Trust Company,
N.A. dated September 5, 1990.***
b. First Amendment to Custodian Agreement between Registrant and Bank
One Trust Company, N.A.*****
9a. Transfer Agency Agreement between Registrant and MGF Service Corp.
dated March 3, 1995.**
b. Agreement between Registrant and Caldwell & Orkin, Inc. dated
August 20, 1992.****
10. Opinion and consent of counsel, as to legality of shares.*****
11. Consent of independent auditors.
C-10
<PAGE>
12. None.
13. Agreement concerning initial capital of Registrant
(Market Opportunity Fund).*
14. None.
15a. Distribution Plan of Market Opportunity Fund of the Registrant.*
b. Form of Distribution Plan Sub-Agreement.*
16. Schedule for Computation of performance quotation.*****
27. Financial Data Schedule
18. Power of Attorney appointing H. Eugene Caldwell and Michael B.
Orkin (see Signature Page to this Amendment).******
_______________
* Previously filed on May 30, 1990 in connection with
Registrant's initial Registration Statement on Form N-1A.
** Previously filed on August 8, 1990 in connection with
Registrant's Pre-Effective Amendment No. 1 to its Registration
Statement on Form N-1A.
*** Previously filed on December 24, 1990 in connection with
Registrant's Pre-Effective Amendment No. 2 to its Registration
Statement on Form N-1A.
**** Previously filed on June 25, 1992 in connection with
Registrant's Post-Effective Amendment No. 2 to its Registration
Statement on Form N-1A.
***** Previously filed on August 21, 1992 in connection with
Registrant's Post-Effective Amendment No. 3 to its Registration
Statement on Form N-1A.
****** Previously filed on August 29, 1994 in connection with
Registrant's Post-Effective Amendment No. 6 to its Registration
Statement on Form N-1A.
******* Previously filed on June 30, 1995 in connection with
Registrant's Post-Effective Amendment No. 7 to its Registration
Statement on Form N-1A.
C-11
THE OTC SELECT-100 FUND, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
The OTC Select-100 Fund, Inc., a Maryland corporation having
its principal office in Maryland at Baltimore, Maryland
(hereinafter called "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended and
restated in its entirety by striking out in their entirety
Articles I through X of the Articles of Incorporation and
inserting in lieu thereof the following:
ARTICLE I
Name
----
The name of the corporation is the OTC Select-100 Fund, Inc.
(the "Corporation").
ARTICLE II
Corporate Purposes
------------------
The purpose for which the Corporation is formed is to engage
in the business of an open-end management investment company.
The Corporation may engage in any other business and shall
have all powers conferred upon or permitted to corporations by
the Maryland General Corporation Law.
ARTICLE III
Principal Office and Resident Agent
-----------------------------------
The present address of the principal office of the
Corporation in Maryland is c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202. The
name of the resident agent of the Corporation in Maryland is The
Corporation Trust Incorporated, and the address of the resident
agent is 32 South Street, Baltimore, Maryland 21202. The
resident agent is a Maryland corporation.
ARTICLE IV
Capital Stock and Stockholders
------------------------------
Section 1. Authorized Shares. The Corporation is
authorized to issue Fifteen Million (15,000,000) shares of Common
Stock par value $.10 per share. The aggregate par value of all
shares which the Corporation is authorized to issue is One
Million Five Hundred Thousand ($1,500,000).
The Board of Directors is authorized to classify or to
reclassify, from time to time, any unissued shares of stock of
the Corporation, whether now or hereafter authorized, by setting,
changing or eliminating the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms and conditions of or rights to require
redemption of the stock.
The provisions of these Articles of Incorporation, including
those in this Section shall apply to each class of stock unless
otherwise provided by the Board of Directors prior to issuance of
any shares of that class:
(a) As more fully set forth hereafter, the assets and liabilities
and the income and expenses of each class of the Corporation's
stock shall be determined separately and, accordingly, the net
asset value, the dividends payable to holders, and the amounts
distributable in the event of dissolution of the Corporation to
holders of shares of the Corporation's stock may vary from class
to class. Except for these differences and certain other
differences hereafter set forth, each class of the Corporation's
stock shall have the same preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of the rights to require
redemption.
(b) All consideration received by the Corporation for the issue or
sale of shares of a class of the Corporation's stock, together
with all funds derived from any investment and reinvestment
thereof, shall irrevocably belong to that class for all purposes,
subject only to the rights of creditors, and shall be so recorded
upon the books of account of the Corporation. Such consideration
and any funds derived from any investment and reinvestment are
herein referred to as "assets belonging to" that class.
(c) The assets belonging to a class of the Corporation's stock
shall be charged with the liabilities of the Corporation with
respect to that class and with that class' share of the
liabilities of the Corporation not attributable to any particular
class, in the latter case in the proportion that the net asset
value of that class (determined without regard to such
liabilities) bears to the net asset value of all classes of the
Corporation's stock (determined without regard to such
liabilities). The determination of the Board of Directors shall
be conclusive as to the allocation of liabilities, including
accrued expenses and reserves, the assets to a particular class
or classes.
(d) Shares of each class of stock shall be entitled to such
dividends or distributions, in stock or in cash or both, as may
be declared from time to time by the Board of Directors with
respect to such class. Dividends or distributions shall be paid
on shares of a class of stock only out of the assets belonging to
that class.
(e) All holders of shares of stock shall vote as a single class
except with respect to any matter which affects only one or more
classes of stock, in which case only the holders of shares of the
classes affected shall be entitled to vote.
(f) In the event of the liquidation or dissolution of the
Corporation, the stockholders of a class of the Corporation's
stock shall be entitled to receive, as a class, out of the assets
of the Corporation available for distribution to stockholders,
the assets belonging to that class less the liabilities allocated
to that class. The assets so distributable to the stockholders
of a class shall be distributed among such stockholders in
proportion to the number of shares of that class held by them and
recorded on the books of the Corporation. In the event that
there are any assets available for distribution that are not
attributable to any particular class of stock, such assets shall
be allocated to all classes in proportion to the net asset value
of the respective classes.
Section 2. Fractional Shares. The Corporation may issue
fractional shares. Any fractional share shall carry
proportionately all the rights of a whole share, excepting any
right to receive a certificate evidencing such fractional share,
but including, without limitation, the right to vote and the
right to receive dividends.
Section 3. Quorum Requirements. The presence in person or
by proxy of the holders of one-third of the shares of stock of
the Corporation entitled to vote without regard to class shall
constitute a quorum at any meeting of the stockholders, except
with respect to any matter which by law requires the approval of
one or more classes of stock, in which case the presence in
person or by proxy of the holders of one-third of the shares of
stock of each class entitled to vote on the matter shall
constitute a quorum.
Section 4. Voting. Notwithstanding any provision of the
laws of the State of Maryland requiring any action to be taken or
authorized by the affirmative vote of the holders of more than a
majority of the outstanding stock of the Corporation, that action
shall, except to the extent otherwise required by the Investment
Company Act of 1940, be effective and valid if taken or
authorized by the affirmative vote of the holders of the majority
of the total number of votes entitled to be case thereon.
Section 5. No Preemptive Rights. No holder of shares of
stock of the Corporation shall be entitled to any preemptive
right other than as the Board of Directors may establish.
Section 6. Redemption of Stock. Each stockholder may
require the Corporation to redeem all or any part of the stock
owned by that holder, upon request to the Corporation or its
designated agent, at the net asset value of the shares of that
class next determined following receipt of the request in a form
approved by the Corporation and accompanied by surrender of the
certificate or certificates for the share, if any, less the
amount of any redemption adjustment or fee, if any, imposed on
such shares as may be provided by the Board of Directors from
time to time, to the extent permitted by the Investment Company
Act of 1940. The Board of Directors may establish procedures for
redemption of stock. Payment of the redemption price by the
Corporation or its designated agent shall be made within seven
days after redemption. The right of redemption may be suspended
and payment of the redemption price may be postponed when
permitted or required by applicable law. The right of a holder
of stock redeemed by the Corporation to receive dividends thereon
and all other rights with respect to the shares shall terminate
at the time as of which the redemption price has been determined,
except the right to receive the redemption price and any dividend
or distribution to which that holder had become entitled as the
record holder of the shares on the record date for that dividend.
The Board of Directors may from time to time, if the Board
determines that it is in the economic or best interest of the
Corporation, redeem upon prior written notice at the net asset
value, and upon such terms as the Board may determine from time
to time, stockholders' accounts which fall below $100,000 or such
lesser amounts as may be determined by the Board. The Board may
also, to the extent the Board of Directors determines that it
would be detrimental to the best interests of the Corporation or
its stockholders to redeem shares entirely in cash, authorize
payment of redemption amounts in portfolio securities or partly
in cash and partly in portfolio securities.
Section 7. Determinations by Board of Directors. Any
determination made in good faith by or pursuant to the direction
of the Board of Directors as to the amount of the assets, debts,
obligations or liabilities of the Corporation, as to the amount
of any reserves or charges set up and the proprietary thereof, as
to the time of or purpose for creating such reserves or charges,
as to the use, alteration or cancellation of any reserves or
charges (whether or not any debt, obligation or liability for
which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required
to be paid or discharged), as to the value of or the method of
valuing any investment or other asset owned or held by the
Corporation, as to the allocation of any income, expense or
liability to any loss of stock of the Corporation, as to the
number of shares of any class of stock outstanding, as to the
income of the Corporation or as to any other matter relating to
the determination of net asset value, the declaration of
dividends or the issue, sale, redemption or other acquisition of
shares of the Corporation, shall be final and conclusive and
shall be binding upon the Corporation and all holders of its
shares, past, present and future, and shares of the Corporation
are issued and sold on the condition and understanding that any
and all such determinations shall be binding as aforesaid.
ARTICLE V
Board of Directors
------------------
Section 1. Initial Board of Directors. The Corporation
shall initially have eight directors. The names of the
Directors, who shall hold office until their successors are duly
chosen and qualified, are H. Eugene Caldwell, Michael B. Orkin,
J. Coleman Budd, Dakin B. Ferris, D. Ross Hamilton, Justus C.
Martin, Jr., Henry H. Porter, Jr., and David Prince.
Section 2. Number of Directors. The number of Directors in
office may be changed from time to time in the manner specified
in the By-Laws of the Corporation, but this number shall never be
less than the minimum number required under the Maryland General
Corporation Law.
Section 3. Certain Powers of Board of Directors. In
addition to its other powers explicitly or implicitly granted
under these Articles of Incorporation, by law or otherwise, the
Board of Directors of the Corporation (a) is expressly authorized
to make, alter, amend or repeal the By-laws of the Corporation,
(b) may from time to time determine whether, to what extent, at
what times and places, and under what conditions and regulations
the accounts and books of the corporation, or any of them, shall
be open to the inspection of the stockholders, and no stockholder
shall have any right to inspect any account, book or document of
the Corporation except as conferred by statute or as authorized
by the Board of Directors of the Corporation, (c) is empowered to
authorize, without stockholder approval, the issuance and sale
from time to time of shares of stock of the Corporation whether
now or hereafter authorized, and (d) is authorized to adopt
procedures for determination of and to maintain constant the net
asset value of shares of the Corporation's stock.
<PAGE>
ARTICLE VI
Liability and Indemnification
-----------------------------
(a) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Corporation shall
have any liability to the Corporation or its stockholders for
damages. This limitation on liability applies to events
occurring at the time a person serves as a director or officer of
the Corporation whether or not such person is a director or
officer at the time of any proceeding in which liability is
asserted.
(b) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent
that indemnification of directors is permitted by the Maryland
General Corporation Law. The Corporation shall indemnify and
advance expenses to its officers to the same extent as its
directors and may do so to such further extent as is consistent
with law. The Board of Directors may by Bylaw, resolution or
agreement make further provision for indemnification of
directors, officers, employees and agents to the fullest extent
permitted by the Maryland Corporation Law.
(c) No provision of this Article shall be effective to protect or
purport to protect any director or officer of the Corporation
against any liability to the Corporation or its security holders
to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
(d) References to the Maryland General Corporation Law in this
Article are to that law as from time to time amended. No
amendment to the charter of the Corporation shall affect any
right of any person under this Article based on any event,
omission or proceeding prior to the amendment.
ARTICLE VII
Amendments
-----------
The Corporation reserves the right from time to time to make
any amendment of these Articles of Incorporation now or hereafter
authorized by law, including any amendment which alters the
contract rights, as expressly set forth in these Articles of
Incorporation, of any outstanding capital stock.
SECOND: The foregoing amendment and restatement was advised
and approved by a majority of the entire Board of Directors and
by all shares of Common Stock entitled to be voted on the matter.
<PAGE>
The undersigned acknowledges these Articles of Amendment and
Restatement to be the corporate act of the Corporation and states
that to the best of his or her knowledge, information and belief
the matters and facts set forth therein with respect to the
authorization and approval thereof are true in all material
respects and that this statement is made under the penalties of
perjury.
THE OTC SELECT-100 FUND, INC.
/s/ H. Eugene Caldwell
H. Eugene Caldwell, President
ATTEST:
/s/ Judith A. Corn
Judith A. Corn, Secretary
<PAGE>
THE OTC SELECT-100 FUND, INC.
ARTICLES SUPPLEMENTARY
The OTC Select-100 Fund, Inc., a Maryland corporation having
its principal office in Maryland at Baltimore, Maryland
(hereinafter called the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation has
increased by Thirty Million (30,000,000) shares the number of
outstanding shares of Common Stock that the Corporation is
authorized to issue.
SECOND: Immediately prior to the increase in authorized
capital stock, the Corporation had authority to issue Fifteen
Million (15,000,000) shares of Common Stock, par value $.10 per
share, such shares having an aggregate par value of $1,500,000.
Pursuant to the increase in authorized capital stock, the
Corporation has authority to issue Forty-Five Million
(45,000,000) shares of Common Stock, par value $.10 per share,
such shares having an aggregate value of $4,500,000.
THIRD: The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940, as
amended.
FOURTH: The total number of shares of capital stock that
the Corporation has authority to issue has been increased by the
Board of Directors of the Corporation in accordance with Section
2-105(c) of the Maryland General Corporation Law.
FIFTH: The Board of Directors of the Corporation has
reclassified the authorized shares of the Common Stock of the
Corporation, par value $.10 per share, as Fifteen Million (15,
000,000) shares of Growth Fund Common Stock, such shares having
an aggregate par value of $1,500,000, Fifteen Million
(15,000,000) shares of Total Return Fund Common Stock, such
shares having an aggregate par value of $1,500,000 and Fifteen
Million (15,000,000) share of Aggressive Growth Fund Common
Stock, such shares having an aggregate par value of $1,500,000.
SIXTH: The preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption
(collectively, the "Rights") for each class of the Corporation's
Common Stock are as set forth in the Corporation's Articles of
Incorporation, and these Articles Supplementary do not change any
of the Rights.
SEVENTH: The shares aforesaid have been duly reclassified
by the Board of Directors pursuant to authority and power
contained in the Articles of Incorporation of the Corporation.
<PAGE>
IN WITNESS WHEREOF, The OTC Select-100 Fund, Inc. has caused
these presents to be signed in its name and on its behalf by its
duly authorized officers who acknowledge that these Articles
Supplementary are the act of the Corporation, that to the best of
their knowledge, information and belief all matters and facts set
forth herein relating to the authorization and approval of the
Articles are true in all material respects and that this
statement is made under the penalties of perjury.
THE OTC SELECT-100 FUND, INC.
/s/ Michael B. Orkin
Michael B. Orkin, President
ATTEST:
/s/ Judith Corn Mahorner
Judith C. Mahorner, Secretary<PAGE>
THE OTC SELECT-100 FUND, INC.
ARTICLES OF AMENDMENT
The OTC Select-100 Fund, Inc., a Maryland corporation having
its principal office in Maryland at Baltimore, Maryland
(hereinafter called the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended by
striking out Article I and inserting in lieu thereof the
following:
ARTICLE I
Name
----
The name of the Corporation (which is hereinafter called the
"Corporation") is The Caldwell & Orkin Funds, Inc.
SECOND: The amendment of the Charter of the Corporation as
hereinabove set forth has been duly advised by the Board of
Directors and approved by the stockholders of the Corporation at
a meeting duly called and held.
IN WITNESS WHEREOF, The OTC Select-100 Fund, Inc. has caused
these presents to be signed in its name and on its behalf by its
President and attested by its Secretary.
THE OTC SELECT-100 FUND, INC.
/s/ Michael B. Orkin
Michael B. Orkin, President
ATTEST:
/s/ Judith Corn Mahorner
Judith C. Mahorner, Secretary
<PAGE>
THE CALDWELL & ORKIN FUNDS, INC.
ARTICLES OF AMENDMENT
The Caldwell & Orkin Funds, Inc., a Maryland corporation
having its principal office in Maryland at Baltimore, Maryland
(hereinafter called the "corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended by
striking the name "Aggressive Growth Fund Common Stock" from Line
5 of Paragraph 5 of the Articles Supplementary filed 8-21-92 and
inserting in lieu thereof the following name:
Market Opportunity Fund Common Stock
SECOND: The amendment of the Charter of the Corporation as
hereinabove set forth has been duly approved by a majority of the
Board of Directors of the Corporation by a consent decree.
THIRD: The amendment is limited to a change expressly
permitted by Section 2-605(a)(4) to be made without action by the
stockholders of the Corporation.
FOURTH: The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940, as
amended.
FIFTH: The preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends,
qualifications,
and terms and conditions of redemption (collectively, the
"Rights")
for each class of the Corporation's Common Stock are as set forth
in
the Corporation's Articles of Incorporation, and this amendment
does
not change any of the Rights.
<PAGE>
IN WITNESS WHEREOF, The Caldwell & Orkin Funds, Inc. has
caused these presents to be signed in its name and on its behalf
by its President and attested by its Secretary.
Dated as of the 19th day of July, 1996.
THE CALDWELL & ORKIN FUNDS, INC.
/s/ Michael B. Orkin
Michael B. Orkin, President
ATTEST:
/s/ M. Rainey Rembert
M. Rainey Rembert, Secretary
<PAGE>
Reasoning for filing Articles of Amendment:
1) The "charter" includes all documents referred to in
1-101(e)(1), as amended, corrected or supplemented by ...
articles supplementary.
2) Under 2-605(a), a majority of the board of directors may amend
the CHARTER of a corporation to:
(4) If the corporation is registered as an open-end company
..change its corporate name OR change the name or other
designation of any class or SERIES of its stock.
3) Under 2-607(a), the articles of amendment shall set fort the
amendment and state:
(2) that the amendment was approved by a majority of the
board
of directors and that:
(ii) the amendment is limited to a change expressly
permitted by Section 2-605 ... and, if approved under Section
2-605(4) ... that the corporation is registered as an open-end
company ...
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 8 to the registration statement under the Securities Act of
1940 (file number 33-35156 and 811-6113) of our report dated June 21,
1996 on our audit of the financial statements and financial highlights of
C&O Aggressive Growth Fund appearing in the Registrant s 1996 Annual
Report. We also consent to the reference to our Firm under the caption
"Independent Accountants."
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
August 26, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000864230
<NAME> THE C & O FUNDS, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 22,139,387
<INVESTMENTS-AT-VALUE> 28,105,753
<RECEIVABLES> 1,262,007
<ASSETS-OTHER> 13,065
<OTHER-ITEMS-ASSETS> 16,042,324
<TOTAL-ASSETS> 45,423,149
<PAYABLE-FOR-SECURITIES> 857,072
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,535,883
<TOTAL-LIABILITIES> 7,392,955
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,516,549
<SHARES-COMMON-STOCK> 2,624,429
<SHARES-COMMON-PRIOR> 2,842,116
<ACCUMULATED-NII-CURRENT> 638,749
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,470,889
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,404,007
<NET-ASSETS> 38,030,194
<DIVIDEND-INCOME> 148,350
<INTEREST-INCOME> 1,004,192
<OTHER-INCOME> 137
<EXPENSES-NET> 514,139
<NET-INVESTMENT-INCOME> 638,540
<REALIZED-GAINS-CURRENT> 3,040,435
<APPREC-INCREASE-CURRENT> 5,540,943
<NET-CHANGE-FROM-OPS> 9,219,918
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,111,925
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 164,910
<NUMBER-OF-SHARES-REDEEMED> 442,987
<SHARES-REINVESTED> 60,400
<NET-CHANGE-IN-ASSETS> (217,677)
<ACCUMULATED-NII-PRIOR> 408,133
<ACCUMULATED-GAINS-PRIOR> 829,748
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 296,800
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 514,139
<AVERAGE-NET-ASSETS> 32,956,721
<PER-SHARE-NAV-BEGIN> 11.35
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 3.31
<PER-SHARE-DIVIDEND> 0.44
<PER-SHARE-DISTRIBUTIONS> 0.44
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.49
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
