<PAGE> 1
[CALDWELL & ORKIN LOGO]
[LETTERHEAD]
SEMI-ANNUAL REPORT TO SHAREHOLDERS
DEAR FELLOW SHAREHOLDER: November 20, 1996
The six month period ended October 31, 1996 has been exciting for investors in
the Caldwell & Orkin Market Opportunity Fund.
Your Fund's performance has attracted considerable media attention. After the
drop in the Dow on July 15, Smart Money noted in its September issue that "In
the first half of July, as his peers were spinning into the void, Orkin actually
gained ground." The Fund was profiled in the August 15, 1996 edition of
Investor's Business Daily, and has also been in The Atlanta Business Chronicle,
Bloomberg News, Forbes and The Wall Street Transcript. Michael Orkin was the
guest on the November 1, 1996 airing of CNBC's "Squawk Box." Finally, the Fund
was the #1 Flexible Portfolio fund (out of 202 funds) as ranked by Lipper
Analytical Services over the 12 months ended October 31, 1996, up 38%(1).
Significantly, the Fund accomplished this with modest levels of market risk(2).
While the attention is welcome, we are even more proud of your Fund's long-term
performance. Thus, our attention remains focused on producing returns and
managing risk for the future.
On August 29, 1996 the name of your Fund was changed from Aggressive Growth to
Market Opportunity. The new name more accurately reflects the Fund's investment
philosophy, implemented on August 24, 1992.
The Caldwell & Orkin Market Opportunity Fund is a dynamic fund that changes as
market conditions change. It seeks to maximize gain with a modest level of
market risk through aggressive management. The utilization of asset allocation
(investing to various degrees in stocks, cash equivalents and sometimes high
quality bonds depending on market conditions) is used to cushion against the
downside. In addition, short positions (selling borrowed shares and attempting
to buy them back at a lower price) are implemented to hedge against market risk
and to make money when stock prices fall.
SIX MONTHS IN REVIEW:
Your Fund has been postured for a high risk, but rising stock market. The
economy was healthy, but several risk factors (see page 2) were present. The
Fund's short position has been maintained in the 20% to 25% range during the six
months, with concentration in the low quality loan and credit card sector.
Significant long positions in the oil services and retail supermarket sectors
benefited the Fund's results. This posturing has been rewarded. In the six
months ended October 31, 1996, the Fund's total return was up 10.77%, versus
9.08% for the S&P 500 and 2.6% for the NASDAQ Composite.
- ---------------
(1) Please call the Fund at (800) 237-7073 for information about the different
ranking services.
(2) From August 24, 1992 through October 31, 1996, the Fund's R-squared, or
correlation to the S&P 500, is only 10%. The Fund's beta, or volatility
relative to the S&P 500, is only .27 or 27% of the market's volatility. An
S&P 500 index fund has a 100% correlation with the market and a beta of
1.00 (computations by Ned Davis Research, Inc.)
<PAGE> 2
OUTLOOK:
The market, and your Fund, are at all-time highs. Based on the long-term
cyclicality of markets, however, we remain concerned that we are in the latter
stages of a high-risk secular bull market. Consider the following:
- Since 1920 there have been three long-term bull and two long-term bear
markets. The current bull market, which began in 1982, has rewarded
patient investors. But it has also reinforced incorrect perceptions that
stock markets can be depended upon for appreciation on a recurring basis.
The bull has just about run the length of, and performed as strongly as,
average past bull markets, which typically run in ten- to twenty-year
cycles.
- Eighty-three percent (83%) of all money ever invested in mutual funds has
come in over the last five years. Conventional wisdom suggests that it is
mostly long-term retirement money and that investors will hold on through
a difficult period. But, if investors are truly long term, why did they
exit conservative bond funds in 1994 and remain out? Barron's reported
that during the summer of 1996, the supposedly "long-term retirement
money" came out of mutual funds. Further, since late 1990 the stock market
has not had a price decline, from high to low, of more than 10% -- the
longest period absent such a decline. This sense of false security will
lead new investors to possibly underestimate the stock market's
volatility.
- Current valuation suggests an overvalued U.S. equities market: a) Cash
yields (dividends) on stocks are near all-time lows; b) stocks are priced
near all time highs as a percentage of Gross Domestic Product; and c)
stocks are priced near an all-time high versus the replacement cost of
assets.
- Speculation in the stock market is rampant. Leverage (margin) in the
stock market is at an all-time high, and the widespread use of derivatives
has added an additional level of speculative activity.
- Stocks as a percentage of household financial assets (adjusted for
pension funds) is very close to its previous 1968 peak of 39.4%, after
bottoming out at 12.6% in 1982.
The Fund continues to be postured for a high risk market. At October 31, 1996 it
was 24.35% short, with plans to remain near the maximum allowable 25%.
Additionally, the day after the November 5th election, 3% of the Fund's assets
were invested in 30-Year U.S. Treasury Bonds. Fund management will strive to
remain hedged, and poised to react decisively to market change. We are a manager
of risk, not just return.
To that end, please direct your attention to the Statistical Risk Profile on
page 3 that compares how the Fund has performed against the S&P 500 during down
periods between September 30, 1992 and September 30, 1996.
While proud of the past we remain focused on the future. Thank you for allowing
us the opportunity to manage your assets.
Sincerely,
Michael B. Orkin, CFA
Portfolio Manager and Chief Investment Officer
2
<PAGE> 3
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
STATISTICAL RISK PROFILE
9/30/92 - 9/30/96
- --------------------------------------------------------------------------------
TEN WORST S&P 500 DAYS
<TABLE>
<CAPTION>
- --------------------------------
DATE C&O MOF S&P 500
- --------------------------------
<S> <C> <C>
03/08/96 -1.30% -3.07%
07/15/96 -0.45 -2.53
02/16/93 -3.88 -2.38
02/04/94 -1.65 -2.26
07/05/96 0.26 -2.22
04/02/93 -1.05 -1.97
01/10/96 0.00 -1.79
11/22/94 0.25 -1.78
04/08/96 -0.70 -1.76
05/02/96 -0.61 -1.70
</TABLE>
The Caldwell & Orkin Market Opportunity Fund outperformed the S&P 500 on nine of
the ten worst days, and was break-even or positive on three of the ten days.
TEN WORST S&P 500 WEEKS
<TABLE>
<CAPTION>
- -----------------------------------
WEEK ENDING C&O MOF S&P 500
- -----------------------------------
<S> <C> <C>
06/24/94 0.24% -3.36%
03/31/94 -3.79 -3.16
04/12/96 -0.01 -2.88
04/23/93 -1.99 -2.60
09/23/94 0.92 -2.39
11/04/94 0.09 -2.37
01/12/96 1.75 -2.37
02/19/93 -2.01 -2.28
08/30/96 -0.13 -2.21
03/01/96 -0.51 -2.19
</TABLE>
The Caldwell & Orkin Market Opportunity Fund outperformed the S&P 500 in nine of
the ten worst weeks, and was positive four of the ten weeks.
TEN WORST S&P 500 MONTHS
<TABLE>
<CAPTION>
- --------------------------------------
MONTH C&O MOF S&P 500
- --------------------------------------
<S> <C> <C>
July, 1996 -0.82% -4.40%
March, 1994 -4.10 -4.35
November, 1994 0.27 -3.72
February, 1994 1.36 -2.79
September,
1994 1.18 -2.47
June, 1994 1.22 -2.44
April, 1993 -3.43 -2.31
November, 1993 -1.62 -1.07
September,
1993 1.78 -0.77
October, 1995 -0.91 -0.30
</TABLE>
The Caldwell & Orkin Market Opportunity Fund outperformed the S&P 500 in seven
of the ten worst months, and was positive five of the ten months.
Computations by Ned Davis Research, Inc.
3
<PAGE> 4
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
TOTAL RETURN PERFORMANCE SUMMARY THROUGH OCTOBER 31, 1996(1)
<TABLE>
<CAPTION>
C&O MARKET NASDAQ
OPPORTUNITY COMPOSITE S&P 500
FISCAL YEAR ENDED FUND INDEX INDEX
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1991 1.25% 2.02% 0.60%
- ------------------------------------------------------------------------------------------
1992 11.86% 19.38% 14.07%
- ------------------------------------------------------------------------------------------
1993* 15.09% 14.30% 8.83%
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
1993** 19.16% 17.34% 7.84%
- ------------------------------------------------------------------------------------------
1994 16.48% 10.95% 5.27%
- ------------------------------------------------------------------------------------------
1995 -2.28% 15.01% 17.47%
- ------------------------------------------------------------------------------------------
1996 31.80% 41.06% 30.07%
- ------------------------------------------------------------------------------------------
Six Months ended 10/31/96 10.77% 2.60% 9.08%
- ------------------------------------------------------------------------------------------
Twelve Months ended 10/31/96 37.99% 17.89% 24.09%
- ------------------------------------------------------------------------------------------
Since Inception (08/24/92) (2) 101.26% 114.55% 90.05%
- ------------------------------------------------------------------------------------------
Since Inception (03/11/91) 116.83% 162.62% 104.90%
- ------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
- ------------------------------------------------------------------------------------------
Since Inception (08/24/92) (2) 18.14% 19.95% 16.55%
- ------------------------------------------------------------------------------------------
Since Inception (03/11/91) 18.08% 23.02% 16.66%
- ------------------------------------------------------------------------------------------
</TABLE>
* For full fiscal year ending April 30, 1993.
** From August 24, 1992 through April 30, 1993 - the portion of the year using
the Caldwell & Orkin Multifactor style of investment management.
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
NET ASSET ALLOCATION
<TABLE>
<CAPTION>
April 30, 1996 Oct. 31, 1996
<C> <C> <S> <C>
Common Stock 73.90% Common 74.04%
Common Stock 17.04% Common 24.35%
Short-term inve 9.06% Short-term 1.61%
100.00% 100.00%
</TABLE>
- ---------------
<TABLE>
<C> <S>
(1) Performance figures represent past performance and do not indicate future results. The investment return and principal value
will fluctuate so that upon redemption you may receive more or less than the original investment. The NASDAQ and S&P 500
figures do not reflect any fees or expenses. Both are widely recognized unmanaged indices of U.S. stocks.
(2) The Caldwell & Orkin Market Opportunity Fund commenced operations on August 24, 1992. A prior fund passively managed and
indexed to the largest 100 OTC stocks began operations on March 11, 1991.
* For full fiscal year ending April 30, 1993.
** From August 24, 1992 through April 30, 1993 -- the portion of the year using the Caldwell & Orkin Multifactor style of
investment management.
</TABLE>
4
<PAGE> 5
CALDWELL & ORKIN MARKET OPPORTUNITY FUND VERSUS MAJOR MARKET INDICES
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT
COMBINED OLD AND ACTIVE STYLE OF INVESTMENT MANAGEMENT
MARCH 11, 1991 THROUGH OCTOBER 31, 1996
<TABLE>
<CAPTION>
C&O Market Opportunity Fund NASDAQ Composite S&P 500 Index
<S> <C> <C> <C>
03/11/91 10,000 10,000 10,000
03/28/91 10,415 10,151 10,028
04/30/91 10,125 10,202 10,060
05/31/91 10,550 10,652 10,477
06/28/91 9,846 10,017 10,001
07/31/91 10,357 10,567 10,477
08/30/91 10,753 11,064 10,714
09/30/91 10,492 11,090 10,535
10/31/91 10,502 11,429 10,690
11/29/91 10,077 11,027 10,247
12/31/91 11,520 12,341 11,420
01/31/92 12,102 13,054 11,221
02/28/92 12,471 13,333 11,354
03/31/92 11,821 12,708 11,135
04/30/92 11,326 12,180 11,474
05/29/92 11,326 12,319 11,513
06/30/92 10,764 11,863 11,343
07/31/92 11,297 12,225 11,820
08/31/92 10,832 11,852 11,565
09/30/92 11,210 12,277 11,699
10/30/92 11,850 12,737 11,754
11/30/92 12,907 13,739 12,138
12/31/92 13,278 14,248 12,247
01/29/93 13,429 14,656 12,361
02/26/93 13,409 14,118 12,517
03/31/93 13,510 14,526 12,783
04/30/93 13,046 13,921 12,487
05/28/93 13,641 14,745 12,798
06/30/93 13,772 14,817 12,839
07/30/93 13,722 14,832 12,801
08/31/93 14,337 15,635 13,273
09/30/93 14,589 16,055 13,170
10/29/93 14,911 16,402 13,456
11/30/93 14,670 15,878 13,312
12/31/93 15,258 16,350 13,478
01/31/94 15,543 16,848 13,947
02/28/94 15,754 16,880 13,554
03/31/94 15,110 15,648 12,966
04/29/94 15,196 15,446 13,146
05/31/94 15,023 15,474 13,342
06/30/94 15,209 14,859 13,017
07/29/94 15,147 15,200 13,458
08/31/94 14,874 16,115 13,999
09/30/94 15,048 16,087 13,654
10/31/94 14,998 16,365 13,972
11/30/94 15,035 15,793 13,451
12/30/94 15,109 15,827 13,650
01/31/95 14,812 15,895 14,014
02/28/95 14,825 16,706 14,559
03/31/95 14,928 17,200 14,993
04/28/95 14,850 17,764 15,442
05/30/95 14,954 18,197 16,060
06/30/95 15,177 19,648 16,433
07/31/95 15,386 21,074 16,978
08/31/95 15,636 21,472 17,021
09/30/95 15,858 21,966 17,739
10/31/95 15,713 21,808 17,675
11/30/95 16,145 22,294 18,451
12/31/95 17,607 22,145 18,807
01/31/96 17,700 22,307 19,447
02/29/96 18,364 23,154 19,627
03/31/96 18,762 23,182 19,816
04/30/96 19,576 25,058 20,107
05/31/96 20,238 26,170 20,626
06/28/96 20,279 24,940 20,704
07/31/96 20,035 22,743 19,789
08/30/96 20,522 24,026 20,207
09/30/96 20,832 25,823 21,344
10/31/96 21,684 25,709 21,933
116.84% 157.09% 119.33%
</TABLE>
CALDWELL & ORKIN MARKET OPPORTUNITY FUND VERSUS MAJOR MARKET INDICES
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT
SINCE INCEPTION OF ACTIVE STYLE OF INVESTMENT MANAGEMENT
AUGUST 24, 1992 THROUGH OCTOBER 31, 1996
<TABLE>
<CAPTION>
C&O Market Opportunity Fund NASDAQ Composite S & P 500 Index
<S> <C> <C> <C>
08/24/92 10,000 10,000 10,000
08/31/92 9,894 9,990 9,987
09/30/92 10,239 10,347 10,103
10/30/92 10,824 10,736 10,151
11/30/92 11,789 11,579 10,482
12/31/92 12,128 12,009 10,577
01/29/93 12,266 12,353 10,675
02/26/93 12,248 11,899 10,809
03/31/93 12,340 12,243 11,039
04/30/93 11,916 11,734 10,784
05/28/93 12,460 12,427 11,052
06/30/93 12,579 12,488 11,088
07/30/93 12,533 12,501 11,055
08/31/93 13,095 13,178 11,463
09/30/93 13,325 13,532 11,374
10/29/93 13,620 13,824 11,621
11/30/93 13,399 13,383 11,496
12/31/93 13,937 13,781 11,639
01/31/94 14,197 14,200 12,044
02/28/94 14,390 14,059 11,705
03/31/94 13,801 13,189 11,197
04/29/94 13,880 13,018 11,353
05/31/94 13,722 13,042 11,522
06/30/94 13,892 12,524 11,242
07/29/94 13,835 12,811 11,622
08/31/94 13,586 13,582 12,090
09/30/94 13,744 13,558 11,792
10/31/94 13,699 13,793 12,066
11/30/94 13,773 13,311 11,616
12/30/94 13,800 13,340 11,788
01/31/95 13,529 13,397 12,103
02/28/95 13,541 14,081 12,573
03/31/95 13,635 14,497 12,948
04/28/95 13,564 14,980 13,336
05/30/95 13,659 15,346 13,869
06/30/95 13,863 16,569 14,191
07/31/95 14,054 17,771 14,662
08/31/95 14,253 18,107 14,699
09/30/95 14,493 18,524 15,319
10/31/95 14,361 18,390 15,264
11/30/95 14,756 18,801 15,934
12/31/95 16,091 18,675 16,242
01/31/96 16,177 18,811 16,794
02/29/96 16,783 19,526 16,950
03/31/96 17,147 19,549 17,113
04/30/96 17,892 21,131 17,364
05/31/96 18,496 22,069 17,812
06/28/96 18,533 21,032 17,880
07/31/96 18,311 19,179 17,090
08/30/96 18,756 20,260 17,450
09/30/96 19,039 21,776 18,433
10/31/96 19,818 21,680 18,942
98.18% 116.80% 89.42%
</TABLE>
5
<PAGE> 6
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
COMMON STOCK - 74.04%
- --------------------------------------------------------------------------------
<TABLE>
ELECTRONICS - 2.14% Shares Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Sanmina Corporation* 19,500 $ 892,125
FINANCE - SAVINGS & LOAN - 4.36%
- ---------------------------------------------------------------------------------------------
FFVA Financial Corp. 39,400 723,975
Palfed, Inc. 82,900 1,088,062
FINANCIAL SERVICES - MISCELLANEOUS - 3.03%
- ---------------------------------------------------------------------------------------------
Dime Bancorp, Inc.* 84,700 1,259,912
INSURANCE - 1.48%
- ---------------------------------------------------------------------------------------------
Conseco, Inc.* 11,500 615,250
METAL ORES - 5.06%
- ---------------------------------------------------------------------------------------------
Alta Gold Company* 36,100 135,375
Bema Gold Corporation* 108,000 654,750
Dayton Mining Corporation* 206,000 1,313,250
OIL & GAS - ROYALTY TRUST - 3.54%
- ---------------------------------------------------------------------------------------------
Sabine Royalty Trust 124,000 1,472,500
OIL & GAS - FIELD SERVICES - 2.08%
- ---------------------------------------------------------------------------------------------
Dawson Production Services, Inc.* 23,100 280,087
Mesa, Inc.* 126,700 585,987
OIL & GAS OFFSHORE DRILLING - 17.32%
- ---------------------------------------------------------------------------------------------
Diamond Offshore* 24,844 1,512,378
Ensco International, Inc.* 17,312 748,744
Global Marine, Inc.* 57,100 1,049,213
Marine Drilling Companies, Inc.* 53,800 746,475
Reading & Bates Corporation* 26,400 759,000
Rowan Companies, Inc.* 50,000 1,118,750
Transocean Offshore Drilling, Inc.* 20,100 1,271,325
OIL FIELD MACHINERY & EQUIPMENT - 6.29%
- ---------------------------------------------------------------------------------------------
Cooper Cameron Corporation* 9,600 613,200
Global Industries, Inc.* 50,400 907,200
Seacor Holdings, Inc.* 18,200 982,800
Varco International, Inc.* 5,700 112,575
</TABLE>
* Non-income producing
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
COMMON STOCK
- --------------------------------------------------------------------------------
<TABLE>
PAPER AND PAPER PRODUCTS - 2.39% Shares Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Republic Group, Inc.* 18,100 $ 298,650
Schweitzer-Mauduit International 22,600 694,950
RETAIL - SPECIALTY - .93%
- ---------------------------------------------------------------------------------------------
Michaels Stores, Inc.* 38,200 386,775
RETAIL - SUPERMARKETS - 9.83%
- ---------------------------------------------------------------------------------------------
Ingles Markets, Inc. 71,500 1,117,188
Riser Foods 53,300 1,432,438
The Vons Companies, Inc.* 27,800 1,539,425
TECHNOLOGY - 7.18%
- ---------------------------------------------------------------------------------------------
Computer Associates International, Inc.* 19,500 1,152,938
Compuware Corporation 15,400 812,350
US Robotics Corporation 5,700 358,388
Wallace Computer Services, Inc. 22,600 663,875
TEXTILES - 3.96%
- ---------------------------------------------------------------------------------------------
National Service Industries, Inc. 31,100 1,072,950
Westpoint Stevens, Inc.* 21,500 572,438
TITANIUM - 4.45%
- ---------------------------------------------------------------------------------------------
Oregon Metallurgical Corporation* 58,800 1,852,200
--------------
TOTAL COMMON STOCKS (COST $25,356,812) $ 30,797,498
==============
</TABLE>
* Non-income producing
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK SOLD SHORT SHARES MARKET VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Advanta Corporation, Class A 16,100 $ 777,831
Advanta Corporation, Class B 16,600 776,050
America Online, Inc. 19,400 526,225
Cheesecake Factory, Inc. 18,100 334,850
Consumer Portfolio Services, Inc. 30,800 377,300
Credit Acceptance Corp. 24,500 661,500
Dean Witter Discover 10,400 612,300
First Merchants Acceptance Corporation 12,600 223,650
Integrated Process Equipment, Inc. 10,400 113,100
Jayhawk Acceptance Corporation 39,400 561,450
KLA Instruments Corporation 17,500 424,375
Kulicke & Soffa Industries, Inc. 33,300 437,062
Liposome Company, Inc. 17,300 296,263
Mattson Technology, Inc. 21,000 191,625
Michaels Stores, Inc. 38,200 386,775
Micron Technology, Inc. 6,200 158,100
Money Store, Inc. 14,300 368,225
National Auto Credit, Inc. 36,130 388,397
Olympic Financial Ltd. 13,000 206,375
Outback Steakhouse, Inc. 19,000 440,563
PRI Automation, Inc. 18,500 656,750
Uromed Corporation 32,600 330,075
Watkins Johnson Company, Inc. 9,900 179,438
Zygo Corporation 19,700 699,350
------------
TOTAL SECURITIES SOLD SHORT (COST $9,704,632) $ 10,127,629
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS:
<TABLE>
<S> <C>
Investments, at value (cost $25,356,812) $ 30,797,498
Cash 1,724,260
Segregated cash with brokers and other financial institutions 11,497,681
Deposits with brokers for securities sold short 8,699,798
Receivables:
Investment securities sold 33,725
Interest and dividends 53,902
Capital shares sold 16,168
Other 17,667
--------------
TOTAL ASSETS $ 52,840,699
--------------
LIABILITIES:
Securities sold short, not yet purchased (proceeds $9,704,632) 10,127,629
Payables:
Investment securities purchased 1,066,386
Accrued advisory fees 30,580
Accrued expenses 18,218
--------------
TOTAL LIABILITIES $ 11,242,813
--------------
TOTAL NET ASSETS $ 41,597,886
===============
NET ASSETS CONSIST OF:
Undistributed net investment income $ 976,136
Undistributed net realized gain 5,006,521
Net unrealized appreciation on investments 5,017,689
Paid-in capital applicable to 2,592,369 shares
outstanding; par value $0.10 per share;
15,000,000 shares authorized 30,597,540
--------------
$ 41,597,886
===============
NET ASSET VALUE AND OFFERING/REDEMPTION PRICE PER SHARE $ 16.0
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 10
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 457,963
Dividends 100,003
--------------
TOTAL INVESTMENT INCOME 557,966
--------------
EXPENSES:
Investment advisory fees 155,919
Transfer agent fees 14,684
Professional fees 11,072
Dividend expense on securities sold short 11,034
Directors' fees and expenses 9,488
Registration and filing fees 9,124
Custodian fees 6,592
Legal fees 3,653
Insurance 1,052
Other (2,040)
--------------
TOTAL EXPENSES 220,578
--------------
NET INVESTMENT INCOME 337,388
--------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 3,535,632
Change in unrealized appreciation (386,318)
--------------
NET REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS 3,149,314
--------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 3,486,702
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 11
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
OCTOBER 31, 1996 APRIL 30, 1996
---------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 337,388 $ 638,540
Net realized gain from investments 3,535,632 3,040,435
Net unrealized appreciation (depreciation) on
investments (386,318) 5,540,943
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 3,486,702 9,219,918
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (1,111,925)
Net realized gains on investments - -
----------- -----------
NET DISTRIBUTIONS TO SHAREHOLDERS - (1,111,925)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net proceeds from sales of shares 9,835,837 2,244,738
Distributions reinvested in shares - 828,129
Cost of shares redeemed (9,754,847) (5,411,750)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS 80,990 (2,338,883)
----------- -----------
TOTAL INCREASE IN NET ASSETS 3,567,692 5,769,110
NET ASSETS:
Beginning of year 38,030,194 32,261,084
----------- -----------
End of year $ 41,597,886 $ 38,030,194
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 12
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31, YEARS ENDED APRIL 30,
1996 ---------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 14.49 $ 11.35 $ 12.26 $ 12.94 $ 11.69 $ 10.49
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from Investment Operations:
Net investment income (loss)* 0.15 0.27 0.54 0.06 (0.01) (0.08)
Net realized and unrealized gain (loss) on
investments 1.41 3.31 (0.81) 1.99 1.77 1.33
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.56 3.58 (0.27) 2.05 1.76 1.25
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
From net investment income - (0.44) (0.41) (0.04) - -
From net realized gain
on investments - - (0.23) (2.69) (0.51) (0.05)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions - (0.44) (0.64) (2.73) (0.51) (0.05)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 16.05 $ 14.49 $ 11.35 $ 12.26 $ 12.94 $ 11.69
========== ========== ========== ========== ========== ==========
TOTAL RETURN 10.77% 31.80% (2.28)% 16.48% 15.09% 11.86%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 41,598 $ 38,030 $ 32,261 $ 18,830 $ 15,116 $ 12,385
RATIOS TO AVERAGE NET ASSETS:
Expenses before dividends on securities
sold short (After Reimbursement)** 1.17% 1.38% 1.18% 1.21% 1.30% 1.64%
Expenses from dividends sold short** 0.06% 0.18% 0.45% - - -
---------- ---------- ---------- ---------- ---------- ----------
Total expenses (After Reimbursement)** 1.23% 1.56% 1.63% 1.21% 1.30% 1.64%
Total expenses (Before Reimbursement)** 1.23% 1.56% 1.79% 1.77% 2.00% 1.88%
Net investment income (loss)** 1.88% 1.94% 3.55% 0.44% (0.01)% (0.76)%
Portfolio turnover 95% 222% 331% 292% 223% 50%
</TABLE>
* Had the Distributor and Advisor not waived a portion of the expenses, net
investment income (loss) per share would have been $.52, ($.01), ($.09), and
($.10) for the years ended April 30, 1995 through 1992, respectively. No
expenses were waived for the year ended April 30, 1996 or for the six months
ended October 31, 1996.
** Adjusted to annual basis
The accompanying notes are an integral part of these financial statements.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The Caldwell & Orkin Market Opportunity Fund, (the "Fund"), is the only active
investment portfolio of The Caldwell & Orkin Funds, Inc., an open-end,
diversified management investment company registered under the Investment
Company Act of 1940, as amended. The Fund's objectives are 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.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
SECURITIES VALUATION:
Securities are stated at the closing price on the date at which the net
asset value is being determined. If the date of determination is not a
trading date, the securities are valued as of the last trading date
preceding the date of determination. Short-term investments having a
maturity of 60 days or less at the time of the purchase are stated at
amortized cost, which approximates market value.
SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME:
Securities transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date and interest income is recorded
as earned. Realized gains and losses from investment transactions are
determined using the specific identification method.
CASH:
The Fund maintains cash available for the settlement of securities
transactions and capital shares reacquired. Available cash is invested
daily in money market instruments.
INCOME TAXES:
As a qualified investment company under Subchapter M of the Internal
Revenue Code, the Fund is not subject to income taxes to the extent that
it distributes all of its taxable income. It is the Fund's policy to meet
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. AGREEMENTS WITH THE ADVISOR AND DISTRIBUTOR:
The Fund has entered into a management agreement with C&O Funds Advisor,
Inc. (the "Advisor") pursuant to which the Advisor provides space,
facilities, equipment, and personnel necessary to perform administrative
and management services for the Fund. The management agreement provides
that the Advisor is responsible for the actual management of the Fund's
portfolio. For such services and expenses assumed by the Advisor, the Fund
pays a monthly advisory fee at incremental annual rates as follows:
<TABLE>
<CAPTION>
Advisory Fee Average Daily Net Assets
------------ -----------------------------------------------------
<S> <C>
.90% Up to $100 million
.80% Not greater than $200 million
.70% Not greater than $300 million
.60% Not greater than $500 million
.50% In excess of $500 million
</TABLE>
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Under that management agreement, the Advisor agreed to waive 40 basis
points of its compensation for the period August, 1992, through February,
1994, and 20 basis points for the period March, 1994, through, February,
1995.
The Advisor has agreed to reimburse the Fund to the extent necessary to
prevent the Fund's annual ordinary operating expenses (excluding taxes,
brokerage commissions and extraordinary charges such as litigation costs)
from exceeding 2.0% of the Fund's average daily net assets. No such
reimbursement was required for the six months ended October 31, 1996.
The Fund has entered into a distribution agreement with C&O Funds
Distributor, Inc. (the "Distributor") pursuant to which the Distributor
provides broker/dealer services for the Fund. The Distributor is
responsible for the sales and redemptions of the shares of the Fund. The
Distributor does not charge the Fund for these services.
C&O Funds Advisor, Inc. and C&O Funds Distributor, Inc. are wholly-owned
subsidiaries of Caldwell & Orkin, Inc.
3. INVESTMENT PORTFOLIO TRANSACTIONS:
INVESTMENT PURCHASES AND SALES: For the six months ended October 31,
1996, purchases and proceeds from sales of investments (excluding
securities sold short and short-term investments) aggregated $22,947,833
and $23,919,755, respectively.
SHORT SALES AND SEGREGATED CASH: Short sales 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 deliver to the buyer upon the short sale;
the Fund is then obligated to replace the security borrowed by purchasing
it in the open market at some later date. The Fund will incur a loss if
the market 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 value between those
dates.
All short sales must be fully collateralized. The Fund maintains the
collateral in segregated accounts consisting of cash and/or U.S.
Government securities sufficient to collateralize the market value of its
short positions. Typically, the segregated cash with brokers and other
financial institutions exceeds the minimum requirements. On October 31,
1996, the Fund exceeded its minimum margin requirements by approximately
$788,000.
The Fund may also sell short "against the box" (i.e. the Fund enters into
a short sale as described above, while holding an offsetting long position
in the security which it sold short). If the Fund enters into a short sale
against the box, it will segregate an equivalent amount of securities
owned by the Fund as collateral while the short sale is outstanding.
The Fund limits the value of its short positions (excluding short sales
"against the box") to 25% of the Fund's total net assets. At October 31,
1996, the Fund had 24.35% of its total net assets in short positions.
For the six months ended October 31, 1996, the cost of investments
purchased to cover short sales and proceeds from investments sold short
were $19,209,037 and $22,341,571, respectively.
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS:
Capital share transactions for the six months ended October 31, 1996, and
the year ended April 30, 1996, were as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
10/31/96 04/30/96
--------------------------------
<S> <C> <C>
Shares sold 639,815 164,910
Shares issued in connection with
reinvestment of distributions - 60,400
Shares reacquired (671,884) (442,987)
--------------------------------
Net decrease in shares outstanding (32,069) (217,677)
--------------------------------
--------------------------------
</TABLE>
5. RELATED PARTY TRANSACTIONS:
C&O Funds Advisor, Inc. and its parent, Caldwell & Orkin, Inc., have made
investments in the Fund during the six months ended October 31, 1996, in
the amounts of $30,000 and $50,000, respectively. All transactions had
been settled as of October 31, 1996.
As of October 31, 1996, Caldwell & Orkin, Inc., C&O Funds Advisor, Inc.,
and Michael B. Orkin had ownership of the Fund of 1.85%, .66%, and 3.68%,
respectively.
15
<PAGE> 16
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
BOARD OF DIRECTORS
Michael B. Orkin, President & Chairman
H. Eugene Caldwell, Chairman Emeritus
Frederick T. Blumer
David L. Eager
Robert H. Greenblatt
Henry H. Porter, Jr.
INVESTMENT ADVISER
C&O Funds Advisor, Inc.
2050 Tower Place
3340 Peachtree Road
Atlanta, Georgia 30326
DISTRIBUTOR
C&O Funds Distributor, Inc.
2050 Tower Place
3340 Peachtree Road
Atlanta, Georgia 30326
CUSTODIAN
Bank One Ohio Trust Company, N.A.
235 West Schrock Road
Westerville, Ohio 43081
TRANSFER, REDEMPTION, AND DIVIDEND
DISBURSING AGENT
MGF Service Corp.
312 Walnut Street
Cincinnati, Ohio 45202
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
1100 Campanile Building
1155 Peachtree Street, N.E.
Atlanta, Georgia 30309-3630
LEGAL COUNSEL
Kilpatrick & Cody, L.L.P.
1100 Peachtree Street
Atlanta, Georgia 30309-4530
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
2050 TOWER PLACE
3340 PEACHTREE ROAD
ATLANTA, GEORGIA 30326
FUND INFORMATION
For a prospectus or further information, please call 1-800-237-7073.
FUND LISTINGS
The Fund is listed in the Wall Street Journal, Investor's Business Daily,
The New York Times, and most local newspapers as C&OMKTOPP.
Its computer quotation symbol is COAGX.
These financial statements are submitted for the general information of the
shareholders of The Caldwell & Orkin Market Opportunity Fund. They are not
authorized for distribution to prospective investors unless preceded or
accompanied by an effective prospectus.
16
