<PAGE> 1
[CALDWELL & ORKIN LOGO]
THE MARKET OPPORTUNITY FUND
ANNUAL REPORT TO SHAREHOLDERS
DEAR FELLOW SHAREHOLDER: JUNE 18, 1999
We are pleased to report that the Caldwell & Orkin Market Opportunity Fund
returned 19.4% for its shareholders in the 12-month period ended April 30, 1999.
We are particularly proud of the Fund's long-term performance. Since its August
24, 1992 commencement of active management through April 30, 1999, the Fund has
not moved in the S&P 500 with Income's wake, yet it has performed well (19.9%
average annual return vs. 21.9% for the index) during one of the strongest bull
markets of all time (see pages 8 & 9) while maintaining a hedged exposure to
market risk. These results are notable given the Fund's "market-risk sensitive"
investment approach. Of course, past performance is no guarantee of future
results.
The Fund uses active asset allocation - the opportunistic shifting of assets
between long stock positions, short stock positions (selling borrowed stock and
then attempting to purchase it at a lower price), high quality bonds and cash
equivalents - to manage exposure to market risk in varying market environments.
Short positions are taken with the intent of making money when stock prices
fall.
The Market Opportunity Fund may be characterized as a moderate hedge fund.
Effective November 16, 1998, short positions can comprise up to 60% of the
Fund's net assets. The prior limitation was 40%. This fairly unique flexibility
gives Fund management considerable investment latitude in its ability to shift
between correlated, market neutral and negatively-correlated postures, and
allows the Fund to hedge against the downside.
The Fund's market exposure can be anywhere from 100% net long to 60% net short.
Historically, the Fund's asset allocation has not approached those extremes, and
it is unlikely that we would be postured either fully net long or net short.
That said, if we were in a true bear market, and the evolution of variables
surrounding the market move (which helps determine our ability to call the
direction of equity prices) gave us a high level of conviction, then conceivably
we could be close to fully net short (60% short and 40% cash). Conversely, in a
true bull market we could have a decidedly net long exposure. We do not fear
going either heavily net short or net long, and under the right circumstances
(as we perceive them) we will. It's important to remember, however, that even
bear markets can have big rallies, and bull markets can have significant
setbacks. The Equity Investment Position chart on page 4 provides a graphical
representation of the Fund's historical asset allocation since commencement of
active management.
The Market Opportunity Fund's investment objective is to provide long-term
capital growth with a short-term focus on capital preservation through asset
allocation and investment selection. When a stock is purchased, two principal
types of risk are assumed, market risk and stock risk. Market risk is the risk
that the broad market declines, taking good companies down with it. Stock risk
is the risk that a stock underperforms due to company-specific reasons.
<PAGE> 2
We highlight the Fund's low market risk profile as evidence of our investment
approach (see page 7). From its August 24, 1992 commencement of active
management through the month ended April 30, 1999, the Fund has correlated with
the S&P 500 with Income only 4.4% of the time, with only 12% of its volatility
as measured by beta. (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.)
We invite shareholders who are invested directly with the Fund (as opposed to
those invested through a brokerage account) to access their account information
24-hours a day, 7-days a week from any touch-tone phone by calling (800)
467-7903.
SIX MONTHS IN REVIEW
The past six months highlight one of the hallmarks of the Market Opportunity
Fund, that being the Fund's low correlation to the market. This period witnessed
a market advance, as measured by both the S&P 500 with Income and NASDAQ
Composite indices. The Market Opportunity Fund did not keep pace with the
indices. It did, however, show positive returns, consistent with the Fund's
objective to preserve capital. As we invest for a full market cycle, we expect
there will be periods of underperformance as well as periods of outperformance
relative to the market. Generally speaking, we would expect to underperform in a
rising market while we're hedged, and to outperform in a declining market
(although not necessarily with positive results). Our goal is to outperform the
market over a full market cycle. Historically, the Fund's long-term relative
performance has exceeded the S&P 500 after market setbacks and has fallen behind
the S&P 500 after market rallies.
In the six months ended April 30, 1999, the Fund rose 4.8%, versus 22.3% for the
S&P 500 with Income and 43.6% for the NASDAQ Composite. For the twelve months
ended April 30, 1999, the Fund has returned 19.4% for its shareholders, versus
21.8% and 36.1% for the S&P and NASDAQ indices, respectively (see page 8).
The six month period began with the Fund positioned 44.7% long, 39.2% short,
1.5% in Treasuries and 14.6% in cash for an effective 5.5% net long exposure.
Throughout the course of the past six months we continued to see a significant
level of risk in the market. Equity valuations remain extremely high,
speculation in the stock market is rampant, household portfolios are at record
levels of equity ownership, there are huge levels of debt both in and outside of
the stock market and the level of margin debt has spiked up considerably (see
pages 5 & 6). Your Fund has been postured for this high-risk stock market. We
have managed sensitivity to market risk by maintaining the Fund's short position
in the 21% net short to 14% net long range (see page 4).
It's been a schizophrenic market. The market's advance through mid-April was
concentrated in a select group of larger-cap issues, and was not broad-based.
Then, consumer growth stocks reversed while the broad market rallied. Generally,
the Fund's longs have performed well during the past six months. The shorts,
however, have underperformed, holding back performance.
There have been many whipsaws in the current market, which have impacted both
the Fund's asset allocation and stock selection. The most recent occurred in
April, when the market saw a massive shift of liquidity out of larger-cap growth
stocks and into smaller-cap value and cyclical issues. This sector rotation was
disadvantageous for the Fund, as we had very little long exposure and
considerable short exposure to cyclical shares.
2
<PAGE> 3
During April, we reduced our growth stock holdings (which had witnessed
considerable price appreciation), covered selected cyclical shorts and added
selected cyclical exposure on the long side. We ended the Fund's fiscal year on
April 30, 1999 positioned 46.8% long, 44.6% short and 8.6% in cash for an
effective 2.2% net long exposure.
Thanks in part to the general closure of the Fund to new investment last August
28, 1998, the Fund's asset base has remained very stable. The Fund opened the
period with $398.8 million in net assets on October 31, 1998, and closed the
period with $397.0 million on April 30, 1999.
For the 12-month period ended April 30, 1999, the management fee rate paid to
the Fund's Manager has decreased from 0.88% (for the 12-month period ended April
30, 1998) to 0.78%. Fund operating expenses (including legal, audit and certain
other expenses) have also decreased from 0.29% to 0.11% for the periods
referenced above. The final component of the Fund's expense ratio, dividend
expense on short sales, has increased from 0.05% to 0.49%. Because of this
increase, which is directly related to our increased exposure to short sales,
the Fund's total expense ratio (based on the 12-months ended April 30, 1999) has
increased slightly from 1.22% to 1.38%.
OUTLOOK
The Asian Flu's beneficial impact as a source of deflationary pressure, which
has allowed U.S. consumers to enjoy low prices on everything from gasoline to
electronics, may be behind us. Prices may be rising, as evidenced by April's
0.7% rise in the Consumer Price Index (CPI), the largest increase for a single
month in nine years. In addition, the strong U.S. economy and low rate of
unemployment have prompted the Federal Reserve to announce a tightening bias.
Tightening would drain liquidity from the financial system, which is generally
negative for financial assets. Conversely, should the CPI not pose a threat (as
seen in May's report) the Fed may choose not to act, and the markets could move
higher. We continue to monitor the Fed's actions closely.
As of the date of this writing, the current market lacks clear direction and is,
in our assessment, in a high-risk state. Until such time as we see a catalyst,
either negative or positive, we will act to protect capital.
YEAR 2000 READINESS
Many computers will not be able to process date-related information on or after
January 1, 2000, due to the manner in which those systems encode the year 2000.
Caldwell & Orkin, Inc. recognizes the many aspects of the Year 2000 (Y2K) issue,
and we are working hard to prevent any disruption in our business operations due
to Y2K-related problems caused by either our internal systems or the computer
systems of our third-party external service providers. Furthermore, we recognize
that many of the issuers of securities we invest in may also be substantially
affected by Y2K-related problems. Accordingly, we are carefully reviewing Y2K
disclosures made by the companies representing the Fund's current long
positions.
While we are taking steps to reduce the risks associated with Y2K-related
computer problems, our internal systems and/or the systems of our service
providers may still be affected. Also, it is not possible to protect against
misleading or incomplete disclosures by the companies we invest in. Any negative
affects may adversely impact the Fund. We are treating the Y2K matter seriously,
and we will continue to allocate the resources necessary to address Y2K issues.
However, we cannot give any assurances that Y2K-related problems will not arise.
3
<PAGE> 4
IN CONCLUSION
Every day brings new challenges and opportunities. Although the Fund is small
(on a relative basis), it was closed to new investment during August, 1998 in
order to preserve our investment flexibility, so that when we meet those
challenges and opportunities, we can move decisively. That's the mindset with
which I have been managing the Fund since August of 1992, and how I envision
managing the Fund going forward.
In the course of a full market cycle, we realize there will be periods when
"irrational exuberance" (to quote Fed Chairman Alan Greenspan) makes it
difficult for those employing a rational, disciplined investment style. However,
we are confident that over time, real fundamentals will prove themselves out,
and thus we will continue to manage for perceived risk, as well as return.
On behalf of myself and my associates, we appreciate your investment in the
Market Opportunity Fund, and we thank you for your continued support.
Sincerely,
Michael B. Orkin, CFA
Portfolio Manager and Chief Investment Officer
[GRAPH]
Caldwell & Orkin Market Opportunity Mutual Fund
Equity Investment Position
Chart RSCO_14
Chart Courtesy of Ned Davis Research, Inc.
4
<PAGE> 5
[GRAPH]
The Economy (The Index of Coincident Economic Indicators)
Chart E121
[GRAPH]
Stocks as a Percentage of Household Financial Assets
Chart S485
Charts Courtesy of Ned Davis Research, Inc.
5
<PAGE> 6
[GRAPH]
Household Debt as a % of GDP
Chart E0502
[GRAPH]
Margin Debt as a Percentage of GDP
Chart S0420
Charts Courtesy of Ned Davis Research, Inc.
6
<PAGE> 7
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
STATISTICAL RISK PROFILE 8/31/92 - 4/30/99
TEN WORST S&P 500 WITH INCOME DAYS
<TABLE>
<CAPTION>
Date C&O MOF S&P 500 Variance
- ---- ------- ------- --------
<S> <C> <C> <C> <C>
10/27/97 -1.60% -6.86% 5.26% ---------------------------
08/31/98 0.42 -6.77 7.19 The Caldwell & Orkin
08/27/98 -0.19 -3.83 3.64 Market Opportunity Fund
08/04/98 0.10 -3.62 3.72 outperformed the S&P
03/08/96 -1.30 -3.07 1.77 500 with Income on all ten
09/30/98 0.55 -3.04 3.59 of the ten worst days, and
10/01/98 0.82 -3.00 3.82 was positive on five of the
01/09/98 -0.28 -2.96 2.68 ten days.
04/11/97 -0.44 -2.72 2.28 ---------------------------
03/23/99 0.23 -2.68 2.91
</TABLE>
TEN WORST S&P 500 WITH INCOME WEEKS
<TABLE>
<CAPTION>
Week Ending C&O MOF S&P 500 Variance
- ----------- ------- ------- --------
<S> <C> <C> <C> <C>
09/04/98 0.33% -5.15% 5.48% ------------------------------
08/28/98 0.65 -4.98 5.63 The Caldwell & Orkin
01/09/98 -0.11 -4.83 4.72 Market Opportunity Fund
10/02/98 1.80 -4.00 5.80 outperformed the S&P
07/24/98 0.20 -3.85 4.05 500 with Income on nine of
08/15/97 -0.30 -3.47 3.17 the ten worst weeks, and
06/24/94 0.24 -3.36 3.60 was positive on six of the ten
03/31/94 -3.79 -3.16 -0.63 weeks.
02/05/99 -1.40 -3.12 1.72 ------------------------------
12/12/97 1.08 -3.06 4.14
</TABLE>
TEN WORST S&P 500 WITH INCOME MONTHS
<TABLE>
<CAPTION>
Month C&O MOF S&P 500 Variance
- ----- ------- ------- --------
<S> <C> <C> <C> <C>
August 1998 3.12% -14.46% 17.58% --------------------------
August 1997 4.00 -5.61 9.61 The Caldwell & Orkin
July 1996 -0.82 -4.40 3.58 Market Opportunity Fund
March 1994 -4.10 -4.35 0.25 outperformed the S&P
March 1997 4.50 -4.10 8.60 500 with Income in all ten
November 1994 0.27 -3.72 3.99 of the ten worst months,
October 1997 4.21 -3.31 7.52 and was positive seven of
February 1999 -1.11 -3.12 2.01 the ten months.
February 1994 1.36 -2.79 4.15 --------------------------
September 1994 1.18 -2.47 3.65
</TABLE>
<TABLE>
<CAPTION>
C&O MOF S&P 500
------- -------
<S> <C> <C>
Correlation Coefficient 4.4% 100.0%
Beta 0.12 1.00
Sharpe Ratio 3.04
</TABLE>
PERFORMANCE DURING THE LAST THREE MARKET DOWNTURNS
<TABLE>
<CAPTION>
C&O MOF S&P 500
------- -------
<S> <C> <C>
July 17, 1998 through August 31, 1998 4.0% -19.3%
October 7, 1997 through October 27, 1997 0.2 -10.8
March 10, 1997 through April 11, 1997 3.4 -9.2
</TABLE>
Short selling began May 2, 1994. Past performance is no guarantee of
future results.
Computations by Ned Davis Research, Inc.
7
<PAGE> 8
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
TOTAL RETURN PERFORMANCE SUMMARY THROUGH APRIL 30, 1999(1)
<TABLE>
<CAPTION>
C&O MARKET NASDAQ S&P 500
FISCAL OPPORTUNITY COMPOSITE WITH INCOME
YEAR ENDED FUND INDEX INDEX
---------- ----------- --------- -----------
<S> <C> <C> <C>
1991 1.25% 2.02% 0.02%
1992 11.96%(2) 19.38% 14.03%
1993 * 15.09% 14.30% 9.23%
1993 ** 21.09% 19.09% 8.67%
1994 16.48% 10.95% 5.32%
1995 (2.28)% 15.01% 17.47%
1996 31.80% 41.06% 30.21%
1997 23.24% 5.90% 25.12%
1998 25.77% 48.20% 41.07%
1999 19.43% 36.10% 21.82%
Six months ended 4/30/99 4.84% 43.55% 22.32%
Since (08/24/92)(3) 236.30% 357.85% 276.42%
Since Inception (03/11/91) 262.31% 435.21% 331.58%
AVERAGE ANNUAL RETURN
One Year 19.43% 36.10% 21.82%
Three Years 22.79% 28.78% 29.07%
Five Years 18.98% 28.22% 26.89%
Since 08/24/92(3) 19.88% 25.54% 21.92%
Since Inception (03/11/91) 17.10% 22.84% 19.64%
</TABLE>
NET ASSET ALLOCATION
[GRAPHIC OMITTED]
Common Stock Sold Short represents the market value, excluding margin
requirements.
- --------------------------------------------------------------------------------
(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) Total return for the fiscal year ended April 30, 1992 has been restated to
11.96% from the previously reported 11.86% due to mathematical rounding.
(3) Effective August 24, 1992, the Caldwell & Orkin Market Opportunity Fund
changed its investment objectives to provide long-term capital growth with a
short-term focus on capital preservation through investment selection and
asset allocation. A prior fund passively managed and indexed to the largest
100 over-the-counter (OTC) stocks began operations on March 11, 1991.
* For the 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. The total
return for the Caldwell & Orkin Market Opportunity Fund for this period has
been restated to 21.09% from the previously reported 19.16% to accurately
reflect the inception Nav when active management of the Fund began.
8
<PAGE> 9
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 April 30, 1999
[GRAPHIC OMITTED]
CALDWELL & ORKIN MARKET OPPORTUNITY FUND VERSUS MAJOR MARKET INDICES
Results of a Hypothetical $10,000 Investment
Since Commencement of Active Style of Investment Management
August 24, 1992 through April 30, 1999
[GRAPHIC OMITTED]
9
<PAGE> 10
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1999
<TABLE>
<CAPTION>
Shares Market Value
------ ------------
<S> <C> <C> <C>
COMMON STOCK (LONG POSITIONS) 46.77%
=====
BANKS - FOREIGN 0.71%
BANK OF TOKYO-MITSU - ADR 192,000 $2,808,000
BANKS - SUPER REGIONAL 0.44%
MERCANTILE BANCORP 30,900 1,761,300
BUILDING - CONSTRUCTION PRODUCTS 1.06%
MASCO CORP. 143,800 4,224,125
BUILDING - RESIDENTIAL/COMMERCIAL 0.96%
PULTE CORP. 56,800 1,285,100
KAUFMAN & BROAD HOME CORP. 49,500 1,203,469
D.R. HORTON, INC. 67,800 1,309,387
COMPUTER - LOCAL NETWORKS 2.78%
NOVELL, INC. * 496,900 11,056,025
COMPUTER - MANUFACTURERS 0.65%
APPLE COMPUTER, INC. * 55,800 2,566,800
COMPUTER - SERVICES 3.30%
ELECTRONIC DATA SYSTEMS 243,900 13,109,625
ELECTRIC - SEMICONDUCTOR EQUIPMENT 0.19%
APPLIED MATERIALS, INC. * 14,500 777,562
FINANCIAL SERVICES - MISCELLANEOUS 0.58%
FIRST DATA CORP. 54,300 2,304,356
HOUSEHOLD - APPLIANCES 2.05%
MAYTAG CORP. 119,000 8,136,625
INSURANCE - LIFE 0.92%
RELIASTAR FINANCIAL CORP. 99,300 3,649,275
LEISURE - MOVIES & RELATED 3.10%
FOX ENTERTAINMENT GROUP * 480,000 12,300,000
LEISURE - PRODUCTS 2.02%
SEAGRAM CO., LTD. 139,800 8,021,025
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 11
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1999
<TABLE>
<CAPTION>
Shares Market Value
------ ------------
<S> <C> <C> <C>
MACHINERY - CONSTRUCTION/MINING 1.66%
TEREX CORP. * 208,100 $6,581,162
MEDIA - CABLE TV 6.87%
CABLEVISION SYSTEMS CORP. * 159,000 12,302,625
COMCAST CORP. 118,600 7,790,537
COX COMMUNICATIONS CL-A * 55,300 4,389,437
TIME WARNER, INC. 40,100 2,807,000
MEDIA - RADIO/TV 3.91%
AT&T CORP. - LIBERTY MEDIA * 73,000 4,662,875
CBS CORP. * 238,600 10,871,213
METAL ORES - MISCELLANEOUS 0.68%
INCO, LTD. 139,800 2,682,413
OIL & GAS - DRILLING 0.46%
ENSCO INTERNATIONAL 50,700 941,119
MARINE DRILLING CO., INC. * 52,000 893,750
OIL & GAS - MACHINERY/EQUIPMENT 0.19%
COOPER CAMERON CORP. * 19,500 753,187
PAPER & PAPER PRODUCTS 1.70%
INTERNATIONAL PAPER CO. 39,000 2,079,188
SMURFIT - STONE CONTAINER * 200,100 4,677,338
RETAIL - RESTAURANTS 0.35%
LONE STAR STEAKHOUSE * 128,200 1,394,175
TELECOMMUNICATIONS - CELLULAR 0.86%
CELLULAR COMM. PUERTO RICO * 143,700 3,412,875
TELECOMMUNICATIONS - EQUIPMENT 1.40%
ANTEC CORP. * 205,100 5,563,338
TELECOMMUNICATIONS - SERVICES 0.93%
CENTURY TEL. ENTERPRISE 91,550 3,684,888
TEXTILE - MILL/HOUSEHOLD 4.22%
SHAW INDUSTRIES, INC. * 111,800 2,026,375
WESTPOINT STEVENS, INC. 429,900 14,724,075
TRANSPORTATION - AIRLINE 1.12%
SOUTHWEST AIRLINES 136,100 4,431,756
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 12
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1999
<TABLE>
<CAPTION>
Shares Market Value
------ ------------
<S> <C> <C> <C>
TRUCKS & PARTS - HEAVY DUTY 3.66%
NAVISTAR INTERNATIONAL* 277,400 $ 14,511,488
TOTAL INVESTMENT IN SECURITIES (COST $160,845,196): 46.77%............... 185,693,488
OTHER ASSETS LESS LIABILITIES: 53.23%................................... 211,342,158
------------
TOTAL NET ASSETS 100.00%................................................. $397,035,646
============
* Non-income producing security
o At April 30, 1999, the cost of securities for federal tax purposes
was $160,993,986. Unrealized appreciation and depreciation of
securities were as follows:
Gross Unrealized Appreciation $ 26,445,526
Gross Unrealized Depreciation (1,746,024)
------------
Net Unrealized Appreciation $ 24,699,502
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE> 13
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1999
<TABLE>
<CAPTION>
Shares Market Value
------ ------------
<S> <C> <C> <C>
COMMON STOCK (SHORT POSITIONS) (44.62)%
=======
BANKS - SUPER REGIONAL (4.19)%
BANK ONE CORP. (148,300) $(8,749,700)
FIRST UNION CORP. (142,400) (7,885,400)
BEVERAGES - SOFT DRINKS (0.82)%
COCA-COLA CO. FEMSA S.A.-ADR (119,000) (2,461,812)
PANAMERICAN BEVERAGES, INC (35,800) (794,312)
BUILDING - MOBILE/MFG. & RV (0.46)%
CLAYTON HOMES, INC. (33,000) (367,123)
FLEETWOOD ENTERPRISES (32,300) (797,406)
OAKWOOD HOMES CORP. (48,900) (678,487)
CHEMICALS - FERTILIZERS (0.05)%
POTASH CORP. SASKATCHEWAN (3,300) (199,650)
CHEMICALS - SPECIALTY (1.73)%
SIGMA-ALDRICH (211,500) (6,873,750)
COMPUTER - LOCAL NETWORKS (0.37)%
DAOU SYSTEMS, INC. (242,400) (1,454,400)
COMPUTER - MANUFACTURERS (1.83)%
HEWLETT-PACKARD CO. (92,300) (7,280,162)
COMPUTER - MEMORY DEVICES (1.99)%
QUANTUM CORP. (90,200) (1,612,325)
SEAGATE TECHNOLOGY, INC. (225,900) (6,296,962)
COMPUTER SOFTWARE - ENTERPRISE (4.67)%
BAAN COMPANY NV (111,100) (1,041,562)
I2 TECHNOLOGIES, INC. (150,000) (5,081,250)
PEREGRINE SYSTEMS, INC. (48,500) (1,091,250)
SAP AG - SPONSORED ADR (276,200) (8,665,775)
SOFTWARE AG SYSTEMS, INC. (321,000) (2,648,250)
COMPUTER SOFTWARE - FINANCIAL (0.80)%
BOTTOMLINE TECHNOLOGIES (54,400) (3,182,400)
ELECTRICAL - SEMICONDUCTOR MFG. (0.90)%
MICRON TECHNOLOGY, INC. (71,800) (2,665,575)
RAMBUS, INC. (15,300) (919,912)
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE> 14
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1999
<TABLE>
<CAPTION>
Shares Market Value
------ ------------
<S> <C> <C> <C>
FINANCE - CONSUMER/COMMERCIAL (1.91)%
ASSOCIATES FIRST CAPITAL (170,900) $(7,573,006)
FINANCE - INVESTMENT BANKERS (2.67)%
EDWARDS (A.G.), INC. (167,800) (5,873,000)
SCHWAB (CHARLES) CORP. (43,200) (4,741,200)
FINANCE - INVESTMENT MANAGEMENT (0.48)%
MORGAN STANLEY DEAN WITTER (19,200) (1,904,400)
FINANCE - MORTGAGE & RELATED SVS. (0.86)%
LONG BEACH FINANCIAL CORP. (46,500) (517,312)
NEW CENTURY FINANCIAL CORP. (219,800) (2,912,350)
FINANCE - SAVINGS & LOAN (1.49)%
GREENPOINT FINANCIAL CORP. (169,300) (5,925,500)
FINANCIAL SERVICES - MISCELLANEOUS (4.51)%
ADVANTA CORP. (167,700) (1,823,737)
MBNA CORP. (538,800) (15,187,425)
PREPAID LEGAL SERVICES (30,800) (877,800)
FOOD - CONFECTIONERY (0.66)%
WRIGLEY (WM) JR. CO. (29,400) (2,607,422)
INSURANCE - LIFE (1.79)%
CONSECO, INC. (225,300) (7,111,031)
INSURANCE - PROPERTY/CASUALTY/TITLE (0.84)%
THE ALLSTATE CORP. (91,300) (3,321,037)
INTERNET - E*COMMERCE (0.55)%
EBAY, INC. (5,200) (1,082,250)
NET.B@NK, INC. (5,800) (1,096,200)
INTERNET - ISP/CONTENT (0.19)%
IVILLAGE, INC. (9,700) (766,300)
INTERNET - NETWORK SEC/SOLUTIONS (0.89)%
SECURITY DYNAMICS TECH, INC. (163,200) (3,549,600)
LEISURE - PHOTO EQUIPMENT/RELATED (1.96)%
POLAROID CORP. (377,300) (7,781,812)
LEISURE - SERVICES (1.94)%
THE WALT DISNEY CO. (242,000) (7,683,500)
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 15
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1999
<TABLE>
<CAPTION>
Shares Market Value
------ ------------
<S> <C> <C> <C>
MEDICAL - BIOMEDICAL/GENETICS (0.79%)
IMMUNEX CORP. (32,800) $(3,132,400)
MEDICAL - ETHICAL DRUGS (0.24%)
ELAN CORP PLC-ADR (18,700) (963,050)
MEDICAL - INSTRUMENTS (0.67%)
VENTANA MEDICAL SYSTEMS (108,300) (2,639,812)
MEDICAL - PRODUCTS (0.15%)
VIVUS, INC. (125,100) (594,225)
RETAIL - DRUG STORES (0.98%)
CVS CORP. (81,600) (3,886,200)
RETAIL - MAIL ORDER & DIRECT (0.40%)
BLACK BOX CORP. (46,600) (1,596,050)
TRANSPORTATION - EQUIPMENT MFG. (0.28%)
TRINITY INDUSTRIES (31,400) (1,093,112)
TRUCK & PARTS - HEAVY DUTY (2.56%)
PACCAR, INC. (181,600) (10,169,600)
-------------
TOTAL SECURITIES SOLD SHORT (PROCEEDS $166,684,522) $(177,156,794)
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 16
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
STATEMENT OF ASSETS & LIABILITIES
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $160,845,196) $185,693,488
Cash 78,901,560
Segregated cash with brokers and other financial 103,264,826
institution
Deposits with brokers for securities sold short 187,983,631
Receivables:
Investment securities sold 28,099,577
Interest and dividends 734,604
Capital shares sold 1,270,152
Other 17,944
------------
TOTAL ASSETS 585,965,782
------------
LIABILITIES:
Securities sold short, not yet purchased
(proceeds $166,684,522) 177,156,794
Payables:
Investment securities purchased 8,886,852
Capital Shares Redeemed 2,432,523
Investment advisory fee 269,959
Accrued expenses 184,008
------------
TOTAL LIABILITIES 188,930,136
------------
TOTAL NET ASSETS $397,035,646
============
NET ASSETS CONSIST OF:
Undistributed net investment income $ 2,921,328
Accumulated net realized gain 29,572,907
Net unrealized appreciation on investments 14,376,020
Paid-in capital applicable to 18,802,538 shares
outstanding; par value $0.10 per share;
30,000,000 shares authorized 350,165,391
------------
$397,035,646
============
NET ASSET VALUE AND OFFERING / REDEMPTION
PRICE PER SHARE $ 21.12
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 17
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 15,164,584
Dividends 336,836
------------
TOTAL INVESTMENT INCOME 15,501,420
------------
EXPENSES:
Investment advisory fees 2,628,554
Transfer agent fees 63,989
Professional fees 62,750
Dividend expense on securities sold short 1,663,303
Directors' fees and expenses 27,079
Registration and filing fees 123,420
Custodian fees 18,148
Legal fees 34,082
Insurance 17,388
Other 39,119
------------
TOTAL EXPENSES 4,677,832
------------
NET INVESTMENT INCOME 10,823,588
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 49,324,492
Change in unrealized appreciation (14,659,048)
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 34,665,444
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 45,489,032
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 18
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30,1999 APRIL 30, 1998
------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 10,823,588 $ 2,817,433
Net realized gain (loss) from investments 49,324,492 (2,695,581)
Net change unrealized appreciation on investments (14,659,048) 23,436,190
------------- -------------
Net increase in net assets resulting
from operations 45,489,032 23,558,042
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (7,355,977) (1,491,994)
Net realized gains on investments (13,237,758) (6,130,010)
------------- -------------
Net distributions to shareholders (20,593,735) (7,622,004)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 305,456,611 160,368,629
Distributions reinvested in shares 17,776,857 6,100,095
Cost of shares redeemed (108,916,091) (85,213,983)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING
FROM CAPITAL SHARE TRANSACTIONS 214,317,377 81,254,741
------------- -------------
TOTAL INCREASE IN NET ASSETS: 239,212,674 97,190,779
NET ASSETS:
Beginning of year 157,822,972 60,632,193
------------- -------------
End of year $ 397,035,646 $ 157,822,972
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 19
<TABLE>
<CAPTION>
The Caldwell & Orkin Market Opportunity Fund
Financial Highlights
Years Ended April 30,
-------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selected Per Share Data:
Net asset value, beginning of year $18.68 $15.77 $14.49 $11.35 $12.26
-------- -------- ------ ------ -------
Income (loss) from Investment Operations:
Net investment income (loss)* 0.53 0.25 0.22 0.27 0.54
Net realized and unrealized gain (loss)
on investments 3.08 3.75 2.95 3.31 (0.81)
-------- -------- ------ ------ -------
Total from investment operations 3.61 4.00 3.17 3.58 (0.27)
-------- -------- ------ ------ -------
Less Distributions:
From net investment income (0.42) (0.21) (0.24) (0.44) (0.41)
From net realized gain on investments (0.75) (0.88) (1.65) - - (0.23)
-------- -------- ------ ------ -------
Total distributions (1.17) (1.09) (1.89) (0.44) (0.64)
-------- -------- ------ ------ -------
Net asset value, end of year $21.12 $18.68 $15.77 $14.49 $11.35
======== ======== ====== ====== =======
Total Return 19.43% 25.77% 23.24% 31.80% (2.28)%
Ratios and Supplemental Data:
Net assets, end of period (in 000's) $397,036 $157,823 $60,632 $38,030 $32,261
Ratios to average net assets:
Expenses before dividends on securities
sold short (After Reimbursement) 0.89% 1.17% 1.26% 1.38% 1.18%
Expenses from dividends sold short 0.49% 0.05% 0.08% 0.18% 0.45%
-------- -------- ------ ------ -------
Total expenses (After Reimbursement) 1.38% 1.22% 1.34% 1.56% 1.63%
Total expenses (Before Reimbursement) 1.38% 1.22% 1.34% 1.56% 1.79%
Net investment income (loss) 3.21% 2.54% 2.01% 1.94% 3.55%
Portfolio turnover 378% 200% 229% 222% 331%
</TABLE>
* Had the Distributor and Advisor not waived a portion of the expenses, net
investment income (loss) per share would have been $.52 for the year
ended April 30, 1995. No expenses were waived for the years ended April
30, 1999 through April 30, 1996.
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
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 with Income.
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
proceeding 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.
CAPITAL ACCOUNTS:
The Fund follows the provisions of Statement of Position 93-2,
"Determination, Disclosure and Financial Statement Presentation of
Income, Capital Gain and Return of Capital Distributions by Investment
Companies."
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.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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% In excess of $100 million but not greater than $200 million
.70% In excess of $200 million but not greater than $300 million
.60% In excess of $300 million but not greater than $500 million
.50% In excess of $500 million
</TABLE>
Under that management agreement, the Advisor agreed to waive 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 year ended April 30,1999.
The Fund has entered into a distribution agreement with CW Fund
Distributors, 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. is a wholly-owned subsidiary of Caldwell &
Orkin, Inc. CW Fund Distributors, Inc. is a wholly-owned subsidiary of
Countrywide Fund Services, Inc.
3. INVESTMENT PORTFOLIO TRANSACTIONS:
INVESTMENT PURCHASES AND SALES:
For the year ended April 30,1999, purchases and proceeds from sales of
investments (excluding securities sold short and short-term
investments) aggregated $617,390,486 and $577,645,620, 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.
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENT PORTFOLIO TRANSACTIONS (CONTINUED):
SHORT SALES AND SEGREGATED CASH (CONTINUED):
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.
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 60% of the Fund's total net assets. At April 30,
1999, the Fund had 44.62% of its total net assets in short positions.
For the year ended April 30, 1999, the cost of investments purchased to
cover short sales and proceeds from investments sold short were
$599,775,390 and $703,006,804, respectively.
4. CAPITAL SHARE TRANSACTIONS:
Capital share transactions were as follows:
<TABLE>
<CAPTION>
Year ended Year ended
April 30, 1999 April 30, 1998
-------------- --------------
<S> <C> <C>
Shares sold 14,672,883 8,996,907
Shares issued in connections with
reinvestment of distributions 859,200 345,810
Shares reacquired (5,178,851) (4,737,049)
----------- -----------
Net increase in shares outstanding 10,353,232 4,605,668
=========== =========
</TABLE>
5. RELATED PARTY TRANSACTIONS:
As of April 30, 1999, Caldwell & Orkin, Inc. and Michael B. Orkin had
ownership of the Fund of 0.01% and 0.71%, respectively.
22
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
THE CALDWELL & ORKIN FUNDS, INC.
We have audited the accompanying statement of assets and liabilities of the
Market Opportunity Fund of the Caldwell & Orkin Funds, Inc. (the "Fund"),
including the schedules of investments and securities sold short, as of April
30, 1999, and the related statement of operations for the year then ended the
statement of changes in net assets for each of the two years in the period then
ended and the financial highlights for periods indicated thereon. These
financial statements and financial highlights are the responsibility of the
fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audits in accordance with generally accepted accounting
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
April 30, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material aspects, the financial position of the
Market Opportunity Fund of the Caldwell & Orkin Funds, Inc. as of April 30,
1999, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period ended and the financial
highlights for the periods presented in conformity with generally accepted
accounting principals.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
May 27, 1999
23
<PAGE> 24
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
BOARD OF DIRECTORS TRANSFER, REDEMPTION & DIVIDEND
Michael B. Orkin, President & Chairman DISBURSING AGENT
H. Eugene Caldwell, Chairman Emeritus Countrywide Fund Services, Inc.
Frederick T. Blumer 312 Walnut Street, 21st Floor
David L. Eager Cincinnati, OH 45202
Robert H. Greenblatt
Henry H. Porter, Jr.
INDEPENDENT ACCOUNTANTS
Tait, Weller & Baker
INVESTMENT ADVISER Eight Penn Center Plaza
C&O Funds Advisor, Inc. Suite 800
2050 Tower Place Philadelphia, PA 19103-2108
3340 Peachtree Road, NE
Atlanta, GA 30326
LEGAL COUNSEL
Kilpatrick Stockton LLP
DISTRIBUTOR 1100 Peachtree Street
CW Fund Distributors, Inc. Suite 2800
312 Walnut Street, 21st Floor Atlanta, GA 30309-4530
Cincinnati, OH 45202
CUSTODIAN
Bank One Ohio Trust Company, N.A.
235 West Schrock Road
Westerville, OH 43081
FUND INFORMATION
The Fund is closed to new investors. For information please call (404) 239-0707
or (800) 237-7073. For information about a specific Market Opportunity Fund
account, please call (800) 467-7903.
FUND LISTINGS
The Fund is listed in The Wall Street Journal, Investor's Business Daily,
The New York and many local newspapers as C&OMktOPP or CaldOrkMO.
Its 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.
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
2050 Tower Place
3340 Peachtree Road, NE
Atlanta, GA 30326
E-mail: [email protected]
