File Nos. 33-35156 and 811-6113
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. __
Post-Effective Amendment No. 13 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 14 /X/
(Check appropriate box or boxes)
THE CALDWELL & ORKIN FUNDS, INC.
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (404) 239-0707
Michael B. Orkin, 2050 Tower Place, 3340 Peachtree Road, NE, Atlanta,
Georgia 30326
(Name and Address of Agent for Service)
With copy to: Reinaldo Pascual, Esq., Kilpatrick Stockton LLP,
1100 Peachtree Street, Suite 2800, Atlanta, Georgia 30309
Release Date: August 31, 1999
It is proposed that this filing will become effective:
<TABLE>
<CAPTION>
<S> <C>
________ immediately upon filing pursuant to paragraph (b) ________ on ___ pursuant to paragraph (b) of Rule 485
__/X/___ 60 days after filing pursuant to paragraph (a) ________ on (date) pursuant to paragraph (a) of Rule 485
________ 75 days after filing pursuant to paragraph (a)(2) ________ on (date) pursuant to paragraph (a)(2) of Rule 485
</TABLE>
TITLE OF SECURITIES BEING REGISTERED: Common Stock, par value
$________ per share
The Registrant hereby registers an indefinite number of securities
under Rule 24f-2 of the Investment Company Act of 1940.
<PAGE>
<PAGE>
THE CALDWELL & ORKIN FUNDS, INC.
CROSS REFERENCE SHEET
FORM N-1A
ITEM SECTION IN PROSPECTUS
1 . . . . . . Cover Pages
2 . . . . . . Summary of Important Information, Principal
Investment Objectives and Strategies;
Principal Risks of Investing in the Fund
3 . . . . . . Fees and Expenses of the Fund
4 . . . . . . Principal Investment Objectives and Strategies
5 . . . . . . Financial Highlights
6 . . . . . . Management of the Fund
7 . . . . . . Net Asset Value; Purchase of Shares,
Redemption of Shares; Distributions and
Federal Taxes
8 . . . . . . None
9 . . . . . . Financial Highlights
ITEM SECTION IN STATEMENT OF ADDITIONAL INFORMATION
10 . . . . . Cover Page
11 . . . . . Table of Contents
12 . . . . . The Fund
13 . . . . . Investment Objectives, Policies and Risk
Consideration and Investment Restrictions
Trustees and Officers
14 . . . . . Management of the Fund
15 . . . . . Management of the Fund and General Information
16 . . . . . Management of the Fund, The Distributor, and
General Information
17 . . . . . Portfolio Transactions and Brokerage
Allocation
18 . . . . . General Information
19 . . . . . Determination of Net Asset Value, Purchase of
Shares, the Distributor, Redemption of Shares
and Shareholder Services
20 . . . . . Dividends, Distributions and Taxes
21 . . . . . The Distributor, Purchase of Shares, and
Redemption of Shares
22 . . . . . Performance Information
23 . . . . . Report of Independent Public Accountants,
Financial Statements
<PAGE>
<PAGE>
THE
CALDWELL & ORKIN
MARKET OPPORTUNITY FUND
A NO-LOAD MUTUAL FUND
PROSPECTUS
August 31, 1999
Managed By:
C & O FUNDS ADVISOR, INC.
2050 Tower Place
3340 Peachtree Road, NE
Atlanta, Georgia 30326
(800) 237-7073 (404) 239-0707
TABLE OF CONTENTS
SUMMARY OF IMPORTANT INFORMATION . . . . . . . . . . . . . . . . . . . . . .2
PRINCIPAL RISKS OF INVESTING IN THE FUND . . . . . . . . . . . . . . . .3
PAST PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
FEES AND EXPENSES OF THE FUND . . . . . . . . . . . . . . . . . . . . . .5
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . .6
INVESTMENT OBJECTIVES AND STRATEGIES OF THE FUND . . . . . . . . . . . .7
TEMPORARY DEFENSIVE POSITIONS . . . . . . . . . . . . . . . . . . . . . .9
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . .9
YEAR 2000 READINESS . . . . . . . . . . . . . . . . . . . . . . . . . . .9
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . .10
PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . .10
REDEEMING YOUR SHARES . . . . . . . . . . . . . . . . . . . . . . . . . .12
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
FEDERAL TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . .15
========================================================================
| 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. |
========================================================================
<PAGE>
<PAGE>
SUMMARY OF IMPORTANT INFORMATION
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND'S OBJECTIVE IS
TO PROVIDE CAPITAL GROWTH AND PRESERVATION THROUGH INVESTMENT
SELECTION AND ASSET ALLOCATION.
PRINCIPAL INVESTMENT OBJECTIVES AND STRATEGY. 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. Current income is only an incidental
consideration. 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.
The Manager attempts to achieve its objectives by
diversifying the Fund's portfolio among common stocks and
other equity securities, corporate bonds and notes, agencies
and convertibles, and U.S. government obligations and cash
equivalent securities. The Fund's asset allocation is
established by the Manager and will be modified regularly
based on current market conditions.
A SHORT SALE (INVESTING IN A SHORT POSITION) IS ESTABLISHED
BY SELLING BORROWED SHARES AND ATTEMPTING TO BUY THEM BACK AT
A LOWER PRICE. BORROWED SHARES MUST BE REPAID (I.E., SHORT
POSITIONS MUST BE "COVERED") WHETHER OR NOT THE STOCK PRICE
DECLINES.
The Fund which means emphasizes equity investments and may
invest in companies of any size, so the Fund may have a
substantial majority of its assets invested in stocks of
companies of varying sizes at any time (90-100%). Investors
should note that the Fund's equity investments typically
include short sales (short equity positions) in an effort to
protect assets, limit downside risk, and potentially profit
from a declining stock market or an anticipated decline in
one or more particular stocks. The Fund may hold short
equity positions whose aggregate value may equal up to 60% of
the Fund's net assets.
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 is a wholly-owned subsidiary of
Caldwell & Orkin, Inc., an investment management firm with
approximately $550 million in assets under management.
PURCHASES OF SHARES. Currently, the Fund is generally closed to new
investment, with the exception of shareholders who are invested
directly in the Fund and not through a broker-dealer.
REDEEMING YOUR SHARES. Shares may be redeemed at any time. However,
in some cases, shareholders will be charged a 2% redemption fee as a
percentage of the amount redeemed upon the redemption of shares where
the redemption occurs within a six-month period following the issuance
of such shares.
2
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<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE FUND
An investment in the Fund carries risk, and you may lose money on
your investment. The Fund uses aggressive investment strategies that
have the potential for yielding high returns; however, these
strategies may also result in losses. The Fund seeks long-term
capital 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.
The principal risks of investing in the Fund are:
* Market risk - Stock prices are volatile. In a declining stock
market, stock prices for all companies may decline, regardless of
any one particular company's own unique prospects. During a
recession or a bear market, all stock mutual funds will likely
lose money. Investors should note, however, that the Fund's use
of short sales may cause the Fund to fluctuate independently of
stock market indices such as the S&P 500 and the NASDAQ.
* Short sale risk -- In an effort to protect assets, limit downside
risk, and potentially profit from a declining stock market or an
anticipated decline in one or more particular stocks, the Fund
typically establishes short positions in securities. As
described previously, a short position is established by selling
borrowed shares and attempting to buy them back at a lower price.
Borrowed shares must be repaid (i.e., short positions must be
"covered") whether or not the stock price declines. If the Fund
covers its short positions with shares purchased at higher prices
than the prices at which the borrowed stock was sold, then the
Fund will incur a loss. In a rising market, the Fund may lose
value on its short sales.
* Interest rate risk - Increases in interest rates may lower the
present value of a company's future earnings stream. Since the
market price of a stock changes continuously based upon
investors' collective perceptions of future earnings, stock
prices may decline when investors anticipate or experience rising
interest rates. Falling short-term interest rates may also cause
income from short term money market instruments in which the Fund
is invested to decline.
* Business risk - From time to time, a particular set of
circumstances may affect a particular industry or certain
companies within the industry, while having little or no impact
on other industries or other companies within the industry. For
instance, some technology industry companies rely heavily on one
type of technology. If this technology becomes outdated, too
expensive, or is not favored in the market, companies that rely
on this technology may rapidly become unprofitable. However,
companies outside of the industry or those within the industry
that do not rely on the technology may not be affected at all.
* Small company risk - Stocks of smaller companies may have more
risks than those of larger companies. In general, they have less
experienced management teams, serve smaller markets, and find it
more difficult to obtain financing for growth or potential
development than do larger companies. Due to these and other
factors, small companies may be more susceptible to market
downturns, and their stock prices may be more volatile.
* Market valuation risk - Some companies that are growing very fast
have unreasonable valuations by traditional valuation techniques.
Since these companies' stock prices do not reflect the usual
relationships between price and corporate earnings or income,
their stocks tend to be extraordinarily volatile and speculative.
* Political risk - Regulation or deregulation of a particular
industry can have a material impact on the value of companies
within the affected industry. For example, during the past two
years, the electric and gas utility sectors of the economy have
been moving towards deregulation and open price competition. In
this new environment, some companies will make a successful
transition and prosper under deregulation, while other companies
will mismanage the process and do poorly.
3
<PAGE>
<PAGE>
Past Performance
The bar chart and tables below provide an indication of the risks of
investing in the Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual returns
for 1 year and since inception compare to those of a broad-based
securities market index. As with all mutual funds, past performance
may not be a good indicator of how the Fund will perform in the future.
[INSERT GRAPHIC REGARDING CALENDAR YEARS 1992-98]
Since Active Management
Life of Fund Commenced*
------------ -----------------------
Best Quarter: 4th Quarter 1992 18.45% 4th Quarter 1992 18.45%
Worst Quarter: 2nd Quarter 1992 -8.94% 1st Quarter 1995 -1.20%
================================================================================
Average annual total return as of 4/30/1999**
Since Active Management
1 Year Life of Fund Commenced *
Market Opportunity Fund 22.44% 17.57% 20.62%
S&P 500 with Income 28.58% 19.22% 21.51%
NASDAQ Composite 39.63% 21.59% 24.1%
- -------------------------------------------------------------------------------
* The Fund provides performance return information since August 24,
1992 because the Fund was managed with a different investment
objective and strategy (namely, passive investment in the 100
largest industrial common stocks listed on the NASDAQ National
Market System) prior to that time. The Fund changed investment
objectives to capital growth and capital preservation through
active investment selection and allocation August 24, 1992.
** The table compares the Fund's performance over time to that of
the S&P 500. The S&P 500 is a widely-recognized, capitalization-
weighted, unmanaged index of 500 large U.S. companies chosen for
market size, liquidity and industry group representation and
includes reinvested dividends. The NASDAQ Composite is a market-
value weighted index that includes all of the stocks listed on the
NASDAQ National Market System.
4
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<PAGE>
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if
you buy, hold or sell shares of the Fund. We based the expense
information on expenses from the last fiscal year for the Fund.
Actual expenses may be different from those shown.
SHAREHOLDER TRANSACTION FEES
Redemption fee (as a percentage of amount redeemed)....... 2.00% <F1>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from assets)
Management fees........................................... 0.78% <F2>
12b-1 expenses............................................ None
Other expenses
Operating expenses................................... 0.11%
Dividend Expense on Short Sales of Securities........ 0.49% <F3>
Total Fund Operating Expenses............................. 1.38%
[FN]
<F1>The redemption fee is charged upon any redemption of Fund shares
occurring within a six-month period following the issuance of such
shares. The redemption fee will be imposed on shares purchased on or
after October 1, 1997. For complete information about the redemption
fee, see "Redeeming Your Shares."
<F2>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 net 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.
<F3>SEC Regulation S-X Rule 6-03(g) requires cash dividends declared on
stocks for which the Fund reflects a short position as of the record
date to be recognized as an expense on the ex-dividend date.
</FN>
Example
- -------
This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods
indicated, and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5%
return each year, and that the Fund's fees and expenses remain the
same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 year 3 years 5 years 10 years
------ ------- ------- --------
$141 $440 $760 $1666
The Fund is a no-load fund, so you do not pay any sales charge or
commission when you buy or sell shares. If you buy or sell shares
through a broker, however, you may be charged a fee by that broker.
The Fund does not have a 12b-1 Plan.
5
<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights table is intended to help you understand the
Fund's financial performance for the past five years. The total returns
in the table represent the rate that an investor would have earned on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Tait, Weller & Baker,
whose report along with the Fund's financial statements are included in the
Fund's annual report, a copy of which is available without charge from the
Fund.
<TABLE>
<CAPTION>
Years Ended April 30,
1999 1998 1997 1996 1995
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, $18.68 $15.77 $14.49 $11.35 $12.26
Beginning of Year
Income from Investment Operations: 0.53 0.25 0.22 0.27 0.54
Net Investment Income (Loss)*
Net Gains or Losses on Securities (both 3.08 3.75 2.95 3.31 (.81)
Realized and Unrealized) ------ ------ ------ ----- -----
Total from Investment Operations 3.61 4.00 3.17 3.58 (.27)
Less Distributions:
Dividends from Net Investment Income (0.42) (0.21) (0.24) (0.44) (0.41)
Distributions from Capital Gains (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 Year (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 Rate 378% 200% 229% 222% 331%
</TABLE>
- --------------------------
* Had the Distributor and Manager 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, 1998, 1997 and 1996.
6
<PAGE>
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES OF THE FUND
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 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. Current income is only an incidental
consideration. The Fund seeks to outperform the stock
market over the long- term, as measured by indices such as
the NASDAQ and the S&P 500.
The Manager attempts to achieve the Fund's investment
objective by diversifying the Fund's portfolio among common
stocks and other equity securities, corporate bonds and
notes, agencies and convertibles, and U.S. government
obligations and cash equivalent securities. The Fund's asset
allocation is established by the Manager and will be
modified regularly based on current market conditions.
The Fund typically emphasizes equity investments and may
invest in companies of any size, which means the Fund may
have a substantial majority of its assets invested in stocks
of companies of varying sizes at any time (90-100%).
Investors should note that the Fund's equity investments
typically include short sales (short equity positions) in an
effort to protect assets, limit downside risk, and
potentially profit from a declining stock market or an
anticipated decline in one or more particular stocks.The
Fund may hold short equity positions whose aggregate value
may equal up to 60% of the Fund's net assets.
Investors should note that some of the Fund's management
techniques (such as asset allocation and short sales of
securities) may cause the Fund's performance to deviate from
that of market indices such as the S&P 500 or the NASDAQ
Composite. For example, a high level of cash or a large
short position during a declining market 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 UNDERLYING GOAL OF THE MANAGER'S PHILOSOPHY IS TO
DELIVER A COMBINATION OF SUPERIOR LONG- TERM CAPITAL GROWTH
WITH A SHORT- TERM FOCUS ON CAPITAL PRESERVATION
INVESTMENT PHILOSOPHY. The underlying goal of the Manager's
investment philosophy is to deliver a combination of
superior long-term capital growth with a short-term focus on
capital preservation. In order to achieve these 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. Thus, the Manager focuses on
perceived risk, not just on return.
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 a 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.
7
<PAGE>
<PAGE>
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 percentage of the Fund's assets devoted to
long equity positions, short equity positions, bonds, and
cash equivalents. To help determine asset allocation,
several major factors are used: economic liquidity,
inflation, valuation, sentiment, supply/demand, global
currents and momentum/breadth. Economic liquidity and
inflation are the 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.
THE MANAGER'S MULTI-DIMENSIONAL APPROACH IS DYNAMIC AS WELL
AS FLEXIBLE IN TERMS OF THE CHANGING EMPHASIS OF THE
MARKETS.
Each of the major factors used by the Manager in determining
asset allocation for the Fund are described below.
* 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, yet remains 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 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 investors are pessimistic.
Bearish when too many investors are optimistic.
* Supply/Demand - The relationship between stock supply
(increases with initial public and secondary offerings,
decreases with stock buy backs and insider purchases)
and demand. Bullish with low supply and high demand of
stock. Bearish in the reverse.
* Momentum/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 Currents - The same broad array of factors
described above applied on a global basis to determine
their impact on domestic financial markets.
8
<PAGE>
<PAGE>
TEMPORARY DEFENSIVE POSITIONS
The Fund may, from time to time, take temporary defensive positions
that are inconsistent with the Fund's principal investment strategies
in an attempt to respond to adverse market, economic, political or
other conditions. When the Fund takes a temporary defensive position,
the Fund may not be able to achieve its investment objective.
PORTFOLIO TURNOVER
The Fund's disciplined investment style and use of certain risk
control strategies may result in higher- than-average portfolio
turnover. The rate of portfolio turnover will not be a limiting
factor when the Fund's Manager deems change appropriate and in the
best interest of the Fund's shareholders. 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. Portfolio turnover may also have an impact on the amount of
taxable distributions to shareholders. The Fund's turnover rate will
generally exceed 100% per year.
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. The Fund recognizes the many aspects of the
Year 2000 (Y2K) issue, and it is working hard to prevent any
disruption in the Fund's business operations due to Y2K-related
problems caused by either its internal systems or the computer systems
of third-party external service providers. Further, the Fund
recognizes that many of the issuers of securities invests in may also
be substantially affected by Y2K-related problems. Accordingly, the
Fund's Manager is carefully reviewing Y2K disclosures made by the
companies representing the Fund's current long positions.
While the Fund is taking steps to reduce the risks associated with
Y2K-related computer problems, the Fund's internal systems and/or the
systems of its service providers may still be affected. Also, it is
not possible to protect against misleading or incomplete disclosures
by the companies the Fund invests in. Any negative affects may
adversely impact the Fund. The Fund is treating the Y2K matter
seriously, and will continue to allocate the resources necessary to
address Y2K issues. However, the Fund cannot give any assurances that
Y2K-related problems will not arise.
9
<PAGE>
<PAGE>
MANAGEMENT OF THE FUND
THE RESPONSIBILITY FOR MAKING DECISIONS TO BUY, SELL OR HOLD
A PARTICULAR SECURITY RESTS WITH THE FUND'S MANAGER, C&O
FUNDS ADVISOR, INC., SUBJECT TO REVIEW BY THE FUND'S BOARD
OF DIRECTORS.
C&O Funds Advisor, Inc. (the "Manager") manages the Fund's
investment portfolio on a daily basis, subject to review by
the Fund's Board of Directors. The Manager was formed in 1986
and is a wholly-owned subsidiary of Caldwell & Orkin, Inc.
("C&O, Inc."). C&O, Inc., formed in 1982, presently provides
investment advisory services to corporations, individual
investors, and other institutions, and has funds under
management of approximately $550 million. The Manager is an
independent investment counseling firm with its offices
located at 2050 Tower Place, 3340 Peachtree Road, NE,
Atlanta, Georgia 30326.
For its services to the Fund, the Manager receives monthly
compensation at annual rates which vary in accordance with the
following schedule:
Annualized Percentage of
Average Daily Net Assets Asset Level
------------------------ -----------
.90% $0 - $100,000,000
.80% $100,000,001-$200,000,000
.70% $200,000,001-$300,000,000
.60% $300,000,001-$500,000,000
.50% over $500,000,001
Michael B. Orkin, the sole owner of C&O, Inc., 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
RESTRICTIONS ON PURCHASES OF SHARES. The Fund has been generally
closed to new investment since the close of business on August 27,
1998. However, shareholders who are invested directly in the Fund
(i.e., not through the Omnibus account of a broker-dealer) ("Direct
Shareholders") may (a) purchase additional shares of the Fund for
their accounts, subject to a minimum additional investment of $100,
(b) reinvest dividends and capital gains in their accounts, and (c)
purchase Fund shares in another account under the same social security
number subject to the minimum investment that was required when the
Direct Shareholder's initial account was opened. Additionally, the
spouse and children of Direct Shareholders who share a common address
with such Direct Shareholder may purchase Fund shares directly from
the Fund, subject to the minimum investment that was required when the
Direct Shareholder's initial account was opened. With certain
exceptions, the minimum investment requirements for accounts opened on
or prior to June 10, 1998 were $10,000 for Regular Accounts and $2,000
for an Individual Retirement Account ("IRA"), other tax deferred
retirement account or an account established under the Uniform Gift to
Minors Act. For accounts opened after June 10, 1998, the minimum
investment requirements were generally $100,000 for Regular Accounts
and $25,000 for an IRA, other tax deferred retirement account or an
account established under the Uniform Gift to Minors Act.
Employees of Caldwell & Orkin, Inc. and their spouses and children,
members of the Fund's Board of Directors and their spouses and
children, and clients of Caldwell & Orkin, Inc. are not subject to any
minimum initial investment requirement and may open new accounts
directly with the Fund regardless of whether they are current
shareholders.
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The Fund is closed to both new and additional investment through
Omnibus accounts (which includes discount brokerage accounts).
However, shareholders of the Fund invested through Omnibus accounts,
Financial Advisors that invest their client's assets in the Fund
through Omnibus accounts and qualified defined contribution retirement
plans that invest in the Fund through Omnibus accounts may reinvest
dividends and capital gains using existing Omnibus accounts. In
addition, Caldwell & Orkin, Inc. may invest assets of its current and
future clients in the Fund through Omnibus accounts. Shareholders
invested through Omnibus accounts may also open a direct account with
the Fund.
Notwithstanding the foregoing restrictions, minimum purchase
requirements and exceptions set forth above, the Fund may determine,
in its sole discretion, to accept or reject any request to purchase
shares of the Fund.
HOW TO PURCHASE SHARES. Eligible purchases of shares are priced at the
next Net Asset Value (NAV) after a completed order is received.
Eligible purchases of shares may be made directly from the Fund by
sending a completed application and a check in the amount of your
investment made out to the Caldwell & Orkin Market Opportunity Fund
to:
Regular Mail: Overnight Delivery:
Caldwell & Orkin Market Caldwell & Orkin Market
Opportunity Fund Opportunity Fund
c/o Countrywide Fund c/o Countrywide Fund
Services, Inc., Services, Inc.
P.O. Box 5354 312 Walnut Street 21st Floor
Cincinnati, Ohio 45201-5354 Cincinnati, Ohio 45202
(513) 629-2000
Eligible purchases must be made in amounts that meet applicable
minimum investment requirements. All investments must be in U.S.
dollars. Third-party checks generally are not accepted. You may also
wire an investment to the Fund by wiring federal funds as follows:
Fifth Third Bank Cincinnati ABA #042000314
For Caldwell & Orkin FFC Acct. #713-76953
To: (Insert the Shareholder Name and Account #)
If your wire investment is for a new account, you must forward your
completed account application to the Fund at its regular mailing
address above. Please note that your bank may charge a fee for wiring
services, and the Fund is not responsible for delays in the wiring system.
Purchases through Broker-Dealers. If the Fund reopens to investment
through broker-dealers, then you may also invest in the Fund through
an NASD-registered broker-dealer, rather than investing directly.
Since a broker-dealer may charge you additional or different fees for
purchasing or redeeming shares than those described in this
Prospectus, ask your broker-dealer about his or her fees before
investing. For purchases of shares through a broker, orders are
deemed to have been received by the Fund when the order is received in
good order by the broker, and are executed at the next determined NAV
after such receipt by the broker or the broker's authorized designee.
AUTOMATIC INVESTMENT PLAN. An Automatic Investment Plan is available
for eligible purchases of Fund shares by shareholders of the Fund who
wish to automatically invest a specific amount of money on a regular
basis after satisfying the initial purchase requirements. A
shareholder may authorize the Transfer Agent to automatically debit
his or her bank account on a monthly basis. Debits must be made in
amounts of $100 or more and may be made once per month on the 15th or
last business day of the month. If the 15th falls on a weekend or
holiday, the account will be debited on the previous business day.
Shareholders may participate in the Automatic Investment Plan by
completing the appropriate section of the Regular Account Application.
All requests to change or discontinue the Automatic Investment Plan
must be received in writing fifteen (15) days prior to the next
scheduled debit date. Please call the Fund at (800) 467-7903 if you
wish to participate in the Automatic Investment Plan.
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REDEEMING YOUR SHARES
We will buy back (redeem) your shares at the current NAV on the
day we receive a valid request for redemption. In order to discourage
short term trading and to reduce the cost of account turnover to
shareholders, a redemption fee of 2% of the value of the shares to be
redeemed will be imposed on accounts of shareholders who have held
their shares for less than six months. These fees will be retained by
the Fund for the benefit of the remaining shareholders and will not be
paid to the Manager. No redemption fee is charged by the Fund on
redemptions of shares in Omnibus accounts, but your broker-dealer may
charge additional or different fees for redeeming shares not described
in this Prospectus.
You may redeem your shares by mail by sending a letter of
instruction signed by all beneficial owners of the account to the
Transfer Agent with your name, account number and the amount you wish
to redeem. Mail the redemption request to:
Caldwell & Orkin Market Opportunity Fund
c/o Countrywide Fund Services, Inc.,
P.O. Box 5354
Cincinnati, Ohio 45201-5354.
A SIGNATURE GUARANTEE HELPS PROTEST AGAINST FRAUD. YOU CAN
ONE FROM MOST BANKS OR SECURITIES DEALERS, BUT NOT FROM A NOTARY
PUBLIC. FOR JOINT ACCOUNTS, EACH SIGNATURE MUST BE GUARANTEED.
PLEASE CALL US TO ENSURE THAT YOUR SIGNATURE GUARANTEE WILL BE
PROCESSED CORRECTLY.
If you request sales proceeds via wire redemption, please note that a
signature guarantee is required and a fee for the wiring service will be
deducted from your redemption proceeds. A signature guarantee is also
required for any withdrawal which is mailed to another address or
person that is not the address or person of record.
If you have elected to establish telephone redemption privileges for
your account (see Regular Account Application), then you also may
redeem shares by calling the Transfer Agent at (800) 467-7903 before
4:00 p.m. (Eastern Time) on any day the New York Stock Exchange is
open for business. Telephone redemption proceeds may be wired only
if wiring instructions have been provided on the your initial Regular
Account Application, on a Telephone Redemption Privileges form, or if
wiring instructions are provided, signature guaranteed, at any other
time.
You should note that a telephone redemption may be difficult to
implement during periods of drastic economic or market changes. If
you are unable to implement a telephone redemption at any time, you
may redeem shares by mail as described above. By establishing
telephone redemption privileges, you authorize the Transfer Agent to
act upon any telephone instructions it believes to be genuine (1) to
redeem shares from your account and (2) to mail the redemption
proceeds. The Transfer Agent employs reasonable procedures in an
effort to confirm the authenticity of telephone instructions. The
Transfer Agent's records of telephone redemption are binding. If you
use telephone redemption privileges, you agree that neither the
Transfer Agent nor the Fund will be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
The Fund provides written confirmation of transactions initiated by
telephone as a procedure designed to confirm that telephone
instructions are genuine. As a result of this and other procedures,
the investor may bear the risk of any loss in the event of such a
transaction. However, if the Transfer Agent or the Fund fails to
employ this and other established procedures, the Transfer Agent or
the Fund may be liable.
Telephone redemption is not available for shares held in IRA or other
tax deferred accounts or if proceeds are to be sent to an address
other than the address of record. Furthermore, if any shares being
redeemed are represented by certificates, telephone redemption is not
available.
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If you invested in the Fund through a broker-dealer other than the
Fund's Distributor, you will need to contact your broker-dealer to
redeem your shares. The broker-dealer may charge you additional or
different fees for redeeming shares than those described in this
Prospectus.
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
SMALL ACCOUNTS. Due to the high cost of maintaining smaller accounts
of shareholders who invest directly with the Fund, the Fund reserves
the right to liquidate your account if, as a result of redemptions or
transfers (but not required IRA distributions), your account's balance
falls below the minimum investment that was required when your account
was opened. With certain exceptions, the minimum investment
requirements for accounts opened on or prior to June 10, 1998 were
$10,000 for Regular Accounts and $2,000 for an IRA, other tax deferred
retirement account or an account established under the Uniform Gift to
Minors Act. For accounts opened after June 10, 1998, the minimum
investment requirements were generally $100,000 for Regular Accounts
and $25,000 for an IRA, other tax deferred retirement account or an
account established under the Uniform Gift to Minors Act. If your
account is not increased to the required level after a sixty (60) day
cure period then the Fund may, at its discretion, liquidate the account.
TELEPHONE PURCHASES BY SECURITIES FIRMS. If the Fund reopens to
investment through broker-dealers, then the minimum investment
brokerage firms that are NASD members may telephone the Fund's at
(800) 467-7903 and buy shares for investors who have investments in
either Fund through the brokerage firm's account with the applicable
Fund. By electing telephone purchase privileges, NASD member firms,
on behalf of themselves and their clients, agree that neither the
Fund, the Fund's Distributor nor the Transfer Agent shall be liable
for following telephone instructions reasonably believed to be
genuine. To be sure telephone instructions are genuine, the Fund and
its agents send written confirmations of transactions to the broker
that initiated the telephone purchase. 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. However, if the Transfer Agent or a Fund
fails to follow these established procedures, they may be liable. The
Fund may modify or terminate these telephone privileges at any time.
MISCELLANEOUS. The Fund reserves the right to:
*terminate or modify any of the procedures for purchasing or
redeeming shares at any time;
*refuse to accept or determine to accept any request to purchase
shares of the Fund for any reason;
*refuse any redemption request involving recently purchased shares
until the check for the recently purchased shares has cleared;
*delay mailing redemption proceeds for up to seven days (most
redemption proceeds are mailed within three days after receipt of
a request); or
*if it deems it appropriate to process any redemption request by
paying the redemption proceeds in portfolio securities rather
than cash (typically referred to as "redemption in kind").
DISTRIBUTIONS
The Fund distributes its net investment income and net realized long
and short-term capital gains to its shareholders at least annually,
usually in December. Absent instructions to pay distributions in cash,
distributions will be reinvested automatically in additional shares
(or fractions thereof) of the Fund.
FEDERAL 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. Additionally, any
capital gains or losses derived from short sale activity will
generally be considered short-term capital gains or losses for income
tax purposes, regardless of how long the short position was maintained.
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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 applicability 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.
NET ASSET VALUE
The net asset value (NAV) of the Fund's shares 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
NAV 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 NAV 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 sixty
(60) days or less are valued on an amortized cost basis if their
original term to maturity from the date of purchase was sixty (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.
The Fund's current NAV is available 24 hours a day, 7 days a week from
any touch-tone telephone by calling (800) 467-7903.
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ADDITIONAL INFORMATION
Each shareholder who purchases shares directly from the Fund through
its Distributor, CW Funds Distributor, Inc., 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 dividend and capital gain distributions.
On a semi-annual basis, the Manager will send investors a report which
will include a performance summary, security positions in the Fund and
a letter regarding the Fund's results.
Inquiries regarding a direct shareholder's investment account may be
made to the Fund's Transfer Agent using the address on the back of
this Prospectus. Additionally, shareholders who purchase Fund shares
directly from the Fund's Distributor can also obtain their account
value, share balance, recent transaction information, distribution
information and request a fax of their account statement by calling
(800) 467-7903. All other inquiries should be directed to the Fund at
the address on the front of this Prospectus.
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HOW TO OBTAIN MORE INFORMATION
The Statement of Additional Information ("SAI") contains additional
information about the Fund including a more detailed discussion of its
investment policies and the risks associated with various investments.
The SAI is incorporated by reference into this prospectus. This means
that the SAI is legally a part of this prospectus.
Additional information about the Fund's investments is available in
the Fund's annual and semi-annual reports to shareholders. In the
Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
You can obtain a copy of the Fund's SAI, or the Fund's annual or
semi-annual reports to shareholders by request and without charge by
contacting the Fund at 1-800-237-7073 or in writing to The Caldwell & Orkin
Market Opportunity Fund, 2050 Tower Place, 3340 Peachtree Road,
Atlanta GA 30326.
You can also obtain these documents, and other information about the
Fund from the SEC's website at http://www.sec.gov. You may review and
copy documents at the SEC Public Reference Room in Washington, D.C.
(1-800-SEC-0330). You may request documents by mail from the SEC by writing
to Securities and Exchange Commission, Public Reference Section,
Washington, D.C. 20549-6009. The SEC will charge a duplicating fee for
any requested materials.
SEC File Number: 811-8718
BOARD OF DIRECTORS
Michael B. Orkin, Chairman
H. Eugene Caldwell, Chairman Emeritus
Frederick T. Blumer
David L. Eager
Robert H. Greenblatt
Henry H. Porter
MANAGER
C&O Funds Advisor, Inc.
2050 Tower Place
3340 Peachtree Road, NE
Atlanta, GA 30326
TRANSFER AGENT
Countrywide Fund Services, Inc.
312 Walnut Street
21st Floor
Cincinnati, OH 45202
DISTRIBUTOR
CW Funds Distributor, Inc.
312 Walnut Street
21st Floor
Cincinnati, OH 45202
CUSTODIAN
Bank One Ohio Trust Company, N.A.
235 W. Schrock Road
Westerville, OH 43081
INDEPENDENT ACCOUNTS
Tait, Weller & Baker
Eight Penn Center Plaza, Suite 800
Philadelphia, PA 19103
LEGAL COUNSEL
Kilpatrick Stockton LLP
1100 Peachtree Street
Suite 2800
Atlanta, GA 30309-4530
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STATEMENT OF ADDITIONAL INFORMATION
August 31, 1999
MARKET OPPORTUNITY FUND
OF
THE CALDWELL & ORKIN FUNDS, INC.
2050 Tower Place
3340 Peachtree Road, NE
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 31, 1999 (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
<PAGE>
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TABLE OF CONTENTS
Page
THE FUND ................................................................. 3
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS................... 3
Investment in Small Companies ....................................... 3
Investment in Fixed Income Securities................................ 3
Investments in Short Sales of Securities............................. 4
Investments in Foreign Securities ................................... 5
Lending of Portfolio Securities...................................... 5
Repurchase Agreements................................................ 6
INVESTMENT RESTRICTIONS .................................................. 6
MANAGEMENT OF THE FUND.................................................... 7
Board of Directors................................................... 8
Officers............................................................. 8
Directors ........................................................... 9
Management and Advisory Arrangements................................. 10
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION .......................... 11
DETERMINATION OF NET ASSET VALUE ......................................... 12
THE DISTRIBUTOR .......................................................... 12
PURCHASE OF SHARES ....................................................... 12
REDEMPTION OF SHARES ..................................................... 15
SHAREHOLDER SERVICES ..................................................... 18
Investment Account................................................... 18
Reinvestment of Dividends and Capital Gains Distribution............. 18
DIVIDENDS, DISTRIBUTIONS AND TAXES........................................ 18
Dividends and Distributions.......................................... 18
Taxes ............................................................... 18
PERFORMANCE INFORMATION .................................................. 20
GENERAL INFORMATION ..................................................... 22
Description of Shares ............................................... 22
Principal Shareholders .............................................. 22
Independent Auditors ................................................ 23
Custodian............................................................ 23
Transfer, Redemption, and Dividend Disbursing Agent.................. 23
Legal Counsel ....................................................... 23
Distributor ......................................................... 23
Reports to Shareholders.............................................. 23
Additional Information .............................................. 23
Automated Telephone Access to Fund Information ...................... 23
Financial Statements and Independent Auditors' Report ............... 23
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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,
NE, Atlanta, Georgia 30326, and its telephone number is (404) 239-0707
or (800) 237-7073.
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
Reference is made to "Investment Objectives and Strategies of the
Fund" 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 often 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 share price 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 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.
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
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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. 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.
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 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 highly-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 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
60% 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.
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On the Fund's internal books or in a segregated account at the Fund's
Custodian (or a combination of both), the Fund will segregate liquid
assets (such as cash, U.S. Government securities, or equity
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 any short sale
transactions. In determining the amount to be segregated, the
securities that have been sold short by the Fund are marked to market
daily. To the extent the market price of the security increases and
more assets are required to meet the Fund's short sale obligations,
additional assets will be segregated to ensure adequate coverage of
the Fund's short position obligations.
In addition, the Fund may make short sales "against the box" i.e.,
when the Fund sells a security short when the Fund has segregated
securities equivalent in kind and amount to the securities sold short
(or securities convertible or exchangeable into such securities) and
will 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 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
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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.
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.
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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.
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.
MANAGEMENT OF THE FUND
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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 Fund. 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 75 years old. He is the Chairman Emeritus of C&O
Funds Advisor, Inc., has been a Director of the Fund since its
inception, and was a co-founder of the Fund. Previously, 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 Investment
Counselor. Mr. Caldwell's address is P.O. Box 53216, Atlanta, Georgia
30355.
MICHAEL B. ORKIN, DIRECTOR, PRESIDENT, AND CHAIRMAN (See information
below.)*
FREDERICK T. BLUMER, DIRECTOR
Mr. Blumer is 40 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, Atlanta, Georgia 30339.
DAVID L. EAGER, DIRECTOR
David Eager, who is 57 years old, has been President and Managing
Director of Eager & Associates since July 1, 1984. 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
25 Stone Bridge, Louisville, Kentucky 40207.
ROBERT H. GREENBLATT, DIRECTOR
Robert Greenblatt, who is 38 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 Polaris Capital Management,
Inc., 60 East 42nd St., Suite 2023, New York, New York 10165.
HENRY H. PORTER, JR., DIRECTOR
Henry Porter, who is 64 years old, is a private investor. He is a
director of SEI Corporation, and is an officer and director of
several other private corporations. Mr. Porter's address is 5806
River Knolls Drive, Louisville, Kentucky 40222.
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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 75 years
old. He is the Chairman Emeritus of C&O Funds Advisor, Inc., has been
a Director of the Fund since its inception, and was a co-founder of
the Fund. Previously, 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 Investment Counselor. Mr. Caldwell's address is P.O.
Box 53216, Atlanta, Georgia 30355.
MICHAEL B. ORKIN - President* - Michael Orkin is 40 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.
DANIEL K. BORDEN - Secretary* - Dan Borden is 40 years old. Mr. Borden
was the Controller for Caldwell & Orkin, Inc. from July 1997 until
July 1998, and has been Operations and Administrative Manager for
Caldwell & Orkin, Inc. since July 1998. He is also the Secretary of
Caldwell & Orkin, Inc., C&O Funds Advisor, Inc. and C&O Funds
Distributor, Inc. Prior to his current positions, Mr. Borden was a
Senior Financial Analyst for Riverwood International from January
1995 to July 1997, and an Independent Consultant from June 1993 to
January 1995.
RONALD E. BEDWELL - Treasurer* - Mr. Bedwell is 33 years old. Mr.
Bedwell has been the Controller of Caldwell & Orkin, Inc. since July
1998. Mr. Bedwell is also Treasurer of Caldwell & Orkin, Inc., C&O
Funds Advisor, Inc. and C&O Funds Distributor, Inc. From 1997 until
1998, Mr. Bedwell was a senior accountant at Tait, Weller & Baker in
charge of the Caldwell & Orkin group. From 1996 until 1997, Mr.
Bedwell was an accounting supervisor in charge of thirty-six domestic
and international mutual funds for FPS Services, Inc. Prior to his
work at FPS Services, Mr. Bedwell worked for PFPC, Inc. where he began
as a mutual fund accountant in 1993 and later served as the investment
accounting supervisor for nineteen mutual funds.
* 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 $7,500 per year plus $250 per meeting attended, together
with such directors' actual out-of-pocket expenses relating to
attendance at meetings. The $7,500 annual fee is payable in four
equal quarterly installments and is paid as of the date of each
quarterly Board meeting. During fiscal year 1999, all of the
directors received $____________.
Effective June 1997, the Board of Directors agreed to receive their
compensation entirely in shares of the Fund. Accordingly, each
Director receives shares of the Fund with a value equal to the cash
compensation they would have otherwise received. For example, if a
Director is to receive $2,125 per meeting attended, he receives
$2,125.00 in shares of the Fund, with the net asset value of such
shares being that which is next determined after the Board meeting is
adjourned. Although Directors would be subject to the 2% redemption
fee if they redeem within six months, there are no other restrictions
as to their ability to redeem or otherwise dispose of the shares.
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Alternatively, directors who elect to receive their compensation in
cash have committed to promptly purchase shares of the Fund for the
amount of such compensation at the next determined net asset value
after their order is received.
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.
The principal executive officers of the Manager are H. Eugene Caldwell
- - Chairman Emeritus, Michael B. Orkin - President, Daniel K. Borden,
Secretary, and Ronald E. Bedwell, 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 daily net
assets in excess of $300 million but not more than $500 million; .50%
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, 1999, 1998 and 1997, the Fund paid
$___________, $975,437, and $369,177, 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,
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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 Fund by the Transfer Agent and
the Fund reimburses the Transfer Agent for its costs in connection
with such services.
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.
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
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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, 1999, 1998 and 1997, the Fund paid
$____________, $928,228, and $295,564, respectively, in brokerage
commissions.
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,
Martin Luther King, Jr. 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.
THE DISTRIBUTOR
Set forth below is further information about distribution of Fund
Shares, the Fund's Distributor and the Fund's Distribution Agreement.
Reference is made to "Purchasing Shares" and "Redeeming Your Shares"
in the Prospectus.
The Fund has entered into a Distribution Agreement with CW Funds Distributor,
Inc. (the "Distributor"). The Agreement obligates the Distributor to provide
certain services to the Fund in connection with the offering of the shares
of the Fund.
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
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termination provisions as the Management Agreement described under
"Management of the Fund - Management Arrangement."
PURCHASE OF SHARES
The Distributor is also the principal underwriter of the Fund's
shares. Eligible purchases of Fund shares may be made directly from
the Distributor or from member firms of the NASD that have entered
into dealer agreements with the Distributor, so long as the account
is opened in the name of the investor (i.e., not opened through an
Omnibus account for the benefit of the firm's clients) and the
account satisfies any applicable minimum purchase requirements below.
See "Eligible Purchases of Fund Shares" NASD firms may charge a
reasonable transaction fee for their services. Such transaction 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 a dealer. If the purchase is
made through a dealer, the dealer will supply the Fund with the
required account information. Orders for the purchase of Fund shares
placed directly with the Fund are executed at their next determined
net asset value after receipt of the application form by the
Distributor and receipt by the Fund's Custodian of the investment.
Dealers other than the Distributor have the responsibility for
promptly transferring an investor's application and investment to the
Fund and the Fund's Custodian. Orders for the purchase of Fund shares
placed through a dealer are executed at their next determined net
asset value after receipt by the dealer.
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.
ELIGIBLE PURCHASES OF FUND SHARES. The Fund has been generally closed
to new investment the close of business on August 27, 1998. However,
shareholders who are invested in the Fund directly through the
Distributor ("Direct Shareholders") may (a) purchase additional shares
of the Fund for their accounts, subject to a minimum additional
investment of $100, (b) reinvest dividends and capital gains in their
accounts, and (c) purchase Fund shares in another account under the
same social security number subject to the minimum investment that was
required when the Direct Shareholder's initial account was opened.
Additionally, the spouse and children of Direct Shareholders who share
a common address with such Direct Shareholder may purchase Fund shares
directly through the Distributor, subject to the minimum investment
that was required when the Direct Shareholder's initial account was
opened. With certain exceptions, the minimum investment requirements
for accounts opened on or prior to June 10, 1998 were $10,000 for
Regular Accounts and $2,000 for an Individual Retirement Account
("IRA"), other tax deferred retirement account or an account
established under the Uniform Gift to Minors Act. For accounts opened
after June 10, 1998, the minimum investment requirements were
generally $100,000 for Regular Accounts and $25,000 for an IRA, other
tax deferred retirement account or an account established under the
Uniform Gift to Minors Act. Notwithstanding the foregoing, persons
who requested a Fund Prospectus on or between June 10, 1998, and
August 27, 1998, (as indicated on the records of the Fund's
Distributor) may open a new account directly with the Fund on or
before September 30, 1998, subject to a minimum initial purchase of
$100,000 for a Regular Account or $25,000 for an IRA, other tax
deferred retirement account or an account established under the
Uniform Gift to Minors Act. The subsequent minimum purchase for these
accounts is $100.
Employees of Caldwell & Orkin, Inc. and their spouses and children,
members of the Fund's Board of Directors and their spouses and
children, and clients of Caldwell & Orkin, Inc. are not subject to any
minimum initial investment requirement and may open new accounts
directly with the Fund regardless of whether they are current
shareholders.
The Fund is closed to both new and additional investment through
Omnibus accounts (which includes discount brokerage accounts).
However, shareholders of the Fund invested through Omnibus accounts,
Financial Advisors that invest their client's assets in the Fund
through Omnibus accounts and qualified defined contribution retirement
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plans that invest in the Fund through Omnibus accounts may reinvest
dividends and capital gains using existing Omnibus accounts. In
addition, Caldwell & Orkin, Inc. may invest assets of its current and
future clients in the Fund through Omnibus accounts. Shareholders
invested through Omnibus accounts may also open a direct account with
the Fund.
Notwithstanding the foregoing restrictions, minimum purchase
requirements and exceptions set forth above, the Fund may determine,
in its sole discretion, to accept or reject any request to purchase
shares of the Fund.
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 Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
FOR OVERNIGHT DELIVERY:
Caldwell & Orkin Market Opportunity Fund
c/o Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
(513) 629-2000
PURCHASING BY WIRE. Investors may purchase shares of the Fund by
transmitting Federal Funds by bank wire to Countrywide Fund Services,
Inc. (the "Transfer Agent"). Federal Funds should be wired as follows:
Fifth Third Bank 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 Countrywide Fund Services, Inc. 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 Fund. The required
application should be forwarded to the Transfer Agent. Please note
that your bank may impose a charge for providing wire transfer
services.
AUTOMATIC INVESTMENT PLAN. An Automatic Investment Plan is available
for eligible purchases of Fund Shares by shareholders of the Fund who
wish to automatically invest a specific amount of money on a regular
basis after satisfying the initial purchase requirements. A
shareholder may authorize the Transfer Agent to automatically debit
his or her bank account on a monthly basis. Debits must be made in
amounts of $100 or more and may be made once per month on the 15th or
last business day of the month. If the 15th falls on a weekend or
holiday, the account will be debited on the previous business day.
Shareholders may participate in the Automatic Investment Plan by
completing the appropriate section of the Regular Account application.
All requests to change or discontinue the Automatic Investment Plan
must be received in writing fifteen (15) days prior to the next
scheduled debit date. Requests to participate in the Automatic
Investment Plan may be made by calling the Fund at (800) 467-7903.
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.
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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 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 the
"Fund Determination of Net Asset Value.") If you wish to acquire the
Fund's shares in exchange for securities you should contact 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.
REDEMPTION OF SHARES
GENERAL. Shareholders may request redemption of their shares at any
time by mail or telephone as provided below. In order to discourage
short-term trading, shareholders will be charged a 2% redemption fee
upon the redemption of Fund shares where the redemption occurs within
a six-month period following the issuance of such shares. The
redemption fee will be deducted from redemption proceeds and retained
by the Fund for the benefit of the Fund's remaining shareholders. The
redemption fee will not be paid to the Fund's Manager. No redemption
fee will be charged upon the redemption of shares through Omnibus
accounts of member firms of the NASD. Furthermore, no redemption fee
will be charged upon the redemption of fund shares acquired through
reinvestment of dividends or distributions. The redemption fee will
be imposed on shares purchased on or after October 1, 1997. In
determining whether a redemption fee is payable and; if so, the amount
of such fee, it will be assumed that shares held the longest period of
time by a shareholder are the first to be redeemed. This redemption
fee may be waived, modified or discontinued at any time or from time
to time.
Payment will ordinarily be by check and mailed within three (3)
business days of receipt of the proper notice of redemption, either
by mail or telephone. Payment may also be wired to the shareholder's
account if the procedures set forth below are satisfied. However,
wire transfer fees will be subtracted from the amount of the
redemption.
The value of shares redeemed may be more or less than their original
cost, depending on the Fund's then current net asset value.
REDEMPTION BY MAIL. Shareholders may redeem shares of the Fund by
submitting a written notice to the Transfer Agent. The written notice
must include signatures of all record owners. If proceeds are to be
sent to an address other than the address of record, wired, or sent to
another party, 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. Signature guarantees
cannot be provided by a notary public. Certificates representing Fund
shares being redeemed must be submitted with the redemption request
for it to be honored.
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. If you opened an
account by wire, you cannot redeem shares until your completed
application is received.
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<PAGE>
REDEMPTION BY TELEPHONE. Shareholders who have elected to establish
telephone redemption privileges (see Account Application) may redeem
shares by calling Countrywide Fund Services, Inc. (the "Transfer
Agent") at (800) 467-7903 by 4:00 p.m. eastern time on any day the New
York Stock Exchange is open for business.
If an account has more than one owner, the Transfer Agent may rely on
the instructions of any one owner. Telephone redemption proceeds may
be wired only if wiring instructions are provided on the initial
Regular Account Application, on a Telephone Redemption Privileges
form, or if wiring instructions are provided, signature guaranteed,
at any other time.
Shareholders should be aware that a telephone redemption may be
difficult to implement during periods of drastic economic or market
changes. Should redeeming shareholders be unable to implement a
telephone redemption during such periods, or for any other reason,
they may give appropriate notice of redemption by mail. The Transfer
Agent employs reasonable procedures in an effort to confirm the
authenticity of telephone instructions. The Transfer Agent's records
of telephone redemption are binding. By establishing telephone
redemption privileges, you authorize the Transfer Agent to act upon
any telephone instructions it believes to be genuine (1) to redeem
shares from your account and (2) to mail the redemption proceeds. By
utilizing telephone redemption privileges, the shareholder has agreed
that neither the transfer agent nor the Fund will be liable for
following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund provides written confirmation of
transactions initiated by telephone as a procedure designed to confirm
that telephone instructions are genuine. As a result of this and
other procedures, the investor may bear the risk of any loss in the
event of such a transaction. However, if the Transfer Agent or the
Fund fails to employ this and other established procedures, the
Transfer Agent or the Fund may be liable.
Telephone redemption is not available for shares held in IRA accounts
or if proceeds are to be sent to an address other than the address of
record. Furthermore, if any shares being redeemed are represented by
certificates, telephone redemption is not available. The Fund may
modify or terminate its telephone redemption services at any time upon
thirty (30) days' written notice to shareholders.
Shares may also be redeemed through member firms of the National
Association of Securities Dealers, Inc. who may charge a reasonable
transaction fee. Member firms of the NASD may telephone Countrywide
Fund Services, Inc. at (800) 467-7903 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, that the Fund 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 of shareholders
who invest directly with the Fund, the Fund reserves the right to
liquidate your account if, as a result of redemptions or transfers
(but not required IRA distributions), your account's balance falls
below the minimum investment that was required when your account was
opened. With certain exceptions, the minimum investment requirements
for accounts opened on or prior to June 10, 1998 were $10,000 for
Regular Accounts and $2,000 for an IRA, other tax deferred retirement
account or an account established under the Uniform Gift to Minors
Act. For accounts opened after June 10, 1998, the minimum investment
requirements were generally $100,000 for Regular Accounts and $25,000
for an IRA, other tax deferred retirement account or an account
established under the Uniform Gift to Minors Act.
In such a case, the Fund will notify you that you have sixty (60) days
to make an additional investment to bring the account balance up to at
least the minimum level of investment that was required when the
account was opened. If your account is not increased to the required
level at the end of this sixty-day cure period then the Fund may, at
its discretion, liquidate the account.
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In order to reduce the cost of account turnover to shareholders, a
redemption fee of 2% of the value of the shares to be redeemed will be
imposed on accounts of shareholders who have held their shares for
less than six months. These fees will be retained by the Fund for the
benefit of the remaining shareholders and will not be paid to the Manager.
TELEPHONE PURCHASES AND REDEMPTIONS FOR SECURITIES FIRMS
The following purchase and redemption telephone procedures have been
established by the Fund for investors who purchased Fund shares
through member firms of the NASD who have accounts with the Fund for
the benefit of their clients. Such NASD members 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 transaction 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.
Member firms of the NASD may telephone Countrywide Fund Services, Inc.
at (800) 467-7903 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. If the Fund reopens to investment through
broker-dealers, shares shall be purchased at the next determined net
asset value. Payment for shares purchased through an NASD member firm
must be received from the NASD member firm by the Fund's Custodian by
wire no later than the third business day following the purchase
order. If payment for any purchase order in 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
Transfer Agent. 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 with the Transfer Agent 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. However, if the Transfer Agent or the Fund fails to
employ this and other established procedures, the Transfer Agent or
the Fund may be liable. The Fund reserves the right to modify or
terminate these telephone privileges at any time.
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
17
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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.
INVESTMENT ACCOUNT. Each shareholder who purchases shares directly
from the Distributor has an Investment Account and will receive
statements from the Fund's Transfer Agent quarterly and 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 Fund or vice versa and, commencing ten
days after the receipt by the Transfer Agent of such notice, those
instructions will be effected.
AUTOMATED TELEPHONE ACCESS TO FUND INFORMATION. The Fund's current
net asset value (NAV) is available 24 hours a day, 7 days a week from
any touch-tone telephone by calling (800) 467-7903. Additionally,
shareholders who purchase Fund shares directly from the Distributor
can also obtain their account value, share balance, recent transaction
information, distribution information and request a fax of their
account statement by calling (800) 467-7903.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to distribute all of
its net investment income and net realized long- and short- term
capital gains, if any, to its shareholders at least 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.
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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. Any
capital gains or losses derived from short sale activity will
generally be considered short-term capital gains or losses for income
tax purposes, regardless of how long the short position was
maintained.
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. With respect to individual
investors, any such capital gain generally will constitute a short-
term capital gain subject to ordinary income tax rates if the
redeemed Fund shares were held for twelve months or less and a long-
term capital gain subject to a 20% maximum federal income tax rate if
the redeemed Fund shares were held for more than twelve months.
Capital loss arising from redemption of Fund shares will be treated
as short-term capital loss if the redeemed Fund shares were held for
twelve months or less and long-term capital 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.
Dividends and capital gains distributions may also be subject to state
and local taxes.
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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 and Financial Advisors. 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 hypothetical $10,000 payment
at the beginning of the 1, 5, 10 years (or other) periods
at end of the 1, 5, or 10 (or other periods (or fractional 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.
The following table provides the average annual rates of return for
the Caldwell & Orkin Market Opportunity Fund from its inception
through April 30, 1999. 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.
1 Year (May 1, 1998-April 30, 1999) 19.43%
3 Years (May 1, 1996-April 30, 1999) 22.79%
5 Years (May 1, 1994-April 30, 1999) 18.98%
8.1 Years (since inception)
(March 11, 1991 - April 30, 1999) 17.10%
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 (May 1, 1998-April 30, 1999) $11,943 $1,943
3 Years (May 1, 1996-April 30, 1999) $18,512 $8,512
20
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5 Years (May 1, 1994-April 30, 1999) $23,842 $13,842
8.1 Years (since inception)
(March 11, 1991 - April 30, 1999) $36,231 $26,231
</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 exceptions,
in those 100 stocks.
The following table provides the average annual 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, through April 30, 1998. 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.
1 Year (May 1, 1998-April 30, 1999) 19.43%
3 Years (May 1, 1996-April 30, 1999) 22.79%
5 Years (May 1, 1994-April 30, 1999) 18.98%
6.7 Years (Since Commencement of Hedged Management Style)
(August 24, 1992-April 30, 1999) 19.88%
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 (May 1, 1998-April 30, 1999) 11,943 1,943
3 Years (May 1, 1996-April 30, 1999) 18,512 8,512
5 Years (May 1, 1994-April 30, 1999) $23,842 13,842
6.7 Years (Since Commencement of Hedged Management Style)
(August 24, 1992-April 30, 1999) $33,630 $23,630
</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.
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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 Funds, Inc. 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,
30,000,000 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 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.
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 Article of Incorporation and Bylaws on
file with the Securities and Exchange Commission for the full text of
these provisions.
PRINCIPAL SHAREHOLDERS. As of July 31, 1999, 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
Beneficial Owner Number of Shares Percent of
Class
<S> <C> <C>
Charles Schwab & Co., Inc.
Special Custody A/C FBO Customers
___________ _________%
101 Montgomery Street
San Francisco, California 94104
Donaldson, Lufkin and Jenrette
Secs Corp.
Attn: Mutual Funds ___________ _________%
P.O. Box 2052
Jersey City, NJ 07303
</TABLE>
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<PAGE>
As of July 31, 1999, the Officers and Directors of Caldwell & Orkin
and the Manager, as a group, own _____% of the outstanding shares of
the Fund.
INDEPENDENT AUDITORS. Tait, Weller & Baker has been selected as the
independent accountants of the Fund. The independent accountants are
responsible for auditing the financial statements of the Fund.
CUSTODIAN. Bank One Ohio Trust Co., N.A., the principal address of
which is 235 W. Schrock Road, Westerville, Ohio 43081 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. Countrywide Fund
Services, Inc., 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202, 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 Stockton LLP has been selected as counsel
for the Fund. Kilpatrick Stockton LLP will pass on legal matters for
the Fund in connection with the offering of its shares.Kilpatrick
Stockton LLP 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.
DISTRIBUTOR. CW Funds Distributor, Inc., 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202, is the Fund's Distributor.The
Distributor is primarily responsible for the distribution of Fund 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.
AUTOMATED TELEPHONE ACCESS TO FUND INFORMATION.The Fund's current
net asset value (NAV) is available 24 hours a day, 7 days a week from
any touch-tone telephone by calling (800) 467-7903.Additionally,
shareholders who purchase Fund shares directly from the Distributor
can also obtain their account value, share balance, recent transaction
information, distribution information and request a fax of their
account statement by calling (800) 467-7903.
FINANCIAL STATEMENTS AND INDEPENDENT ACCOUNTANTS' REPORT. The
financial statements of the Market Opportunity Fund for the fiscal
year ended April 30, 1999 were audited by Tait, Weller &Baker, the
Fund's independent accountants, and are incorporated by reference from
the Market Opportunity Fund's 1999 Annual Report to Shareholders. A
copy of such report accompanies this Statement of Additional
Information.Additional copies are available, without charge, by
calling the Fund.
23
<PAGE>
<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.
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.
24
<PAGE>
<PAGE>
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 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.
25
<PAGE>
<PAGE>
Additional Information on Financial Statements
FINANCIAL STATEMENTS OF THE MARKET OPPORTUNITY FUND
INCORPORATED BY REFERENCE IN PART B:
Annual Report to Shareholders for year ended
April 30, 1999:
Independent Accountants' Report
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
PART C. OTHER INFORMATION
Item 23. Exhibits:
Exhibit
Number
-------
A. Amended and Restated Articles of Incorporation of
Registrant.****
A.1. Articles of Amendment ********
B. By-Laws of Registrant.**
C. None.
D. Management Agreement between the Market Opportunity Fund of
Registrant and C & O Funds Advisor, Inc. dated August 20,
1992.*****
E. Form of Distribution Agreement between Registrant and CW Funds
Distributor, Inc. dated _____________, 1999. ********
F. None.
G.1. Custodian Agreement between and Bank One Trust Company , N.A.
dated September 5, 1990.***
G.2. First Amendment to Custodian Agreement between Registrant and
Bank One Trust Company, N.A.*****
G.3. Agreement for Prime Brokerage Clearance Services
between PaineWebber Incorporated and Caldwell & Orkin, Inc.
dated March 28, 1995.
G.4. Agreement for Prime Brokerage Clearance Services
between Furman Selz LLC and Caldwell & Orkin, Inc., dated
March 22, 1996.
G.5. Prime Brokerage Services Agreement between PaineWebber
Incorporated and Caldwell & Orkin, Inc., dated April 9, 1998.
G.6. Agreement for Prime Brokerage Clearance Services
between Merrill Lynch Pierce Fenner and Smith, and Caldwell & Orkin,
Inc., dated May 1, 1998.
26
<PAGE>
<PAGE>
H.1. Transfer Agency Agreement between Registrant and MGF Services
Corp. (aka Countrywide Fund Services, Inc.) dated March 3,
1995.*****
H.2. Agreement between Registrant and Caldwell & Orkin, Inc. dated
August 20, 1992.****
H.3. Distribution Plan of Market Opportunity Fund of the
Registrant.*
H.4. Form of Distribution Plan Sub-Agreement.*
H.5. Schedule for Computation of performance quotation.*****
H.6 Power of Attorney appointing H. Eugene Caldwell and Michael B.
Orkin (see Signature Page to this Amendment).******
I. Opinion and consent of counsel, as to legality of shares.*****
J. Consent of Tait, Weller & Baker
K. None.
L. Agreement concerning initial capital of Registrant (Market
Opportunity Fund).*
M. None.
N. None.
O. None.
______________
* 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.
27
<PAGE>
<PAGE>
******* Previously filed on August 25, 1996 in connection with
Registrant's Post-Effective Amendment No. 8 to its Registration
Statement on Form N-1A.
******** To be filed by amendment.
Item 24. Persons Controlled by or under Common Control with Registrant.
C & O Funds Advisor, Inc., the Funds' Manager which is a Georgia
corporation, is a wholly-owned subsidiary of, and may be deemed to be
controlled by, Caldwell & Orkin, Inc.
Item 25. 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 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 enterprise, against all
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably 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 proceeding, 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
28
<PAGE>
<PAGE>
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 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 26. Business and Other Connections of Investment Adviser
None.
29
<PAGE>
<PAGE>
Item 27. 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 312 Walnut, 21st Floor,
Cincinnati, Ohio 45202 (513) 629-2000.
<TABLE>
<CAPTION>
(1) (2) (3)
Position and Offices Positions and Offices
Name with Underwriter with Registrant
---- -------------------- ---------------------
<S> <C> <C>
_______________ Director None
_______________ President None
_______________ Secretary None
_______________ Treasurer None
</TABLE>
Item 28. 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, except for those records that
may be maintained pursuant to Rule 31a-3 at the offices of
Registrant's Custodian, Bank One Ohio Trust Company, N.A., 235 W.
Schrock Road, Westerville, Ohio 43081, and Transfer Agent, Countrywide
Fund Services, Inc., 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202.
Item 29. Management Services.
None.
Item 30. 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
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.
30
<PAGE>
<PAGE>
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.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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 June, 1999.
THE CALDWELL & ORKIN FUNDS, INC.
(Registrant)
By: /s/ Michael B. Orkin
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>
/s/ H. Eugene Caldwell* Chairman, Emeritus of the Board of June 29, 1999
H. Eugene Caldwell Directors
/s/ Michael B. Orkin Chairman, Director and President June 29, 1999
Michael B. Orkin
/s/ David L. Eager* Director June 29, 1999
David L. Eager
/s/ Robert H. Greenblatt* Director June 29, 1999
Robert H. Greenblatt
/s/ Henry H. Porter, Jr.* Director June 29, 1999
Henry H. Porter, Jr.
/s/ Frederick T. Blumer* Director June 29, 1999
Frederick T. Blumer
/s/ Ronald E. Bedwell Treasurer June 29, 1999
Ronald E. Bedwell
By: /s/ Michael B. Orkin * Attorney-in-Fact June 29, 1999
Michael B. Orkin
* Executed by Michael B. Orkin as Attorney-in-Fact
</TABLE>
INDEX TO EXHIBITS
Exhibit
Number
-------
A. Amended and Restated Articles of Incorporation of
Registrant.****
A.1. Articles of Amendment ********
B. By-Laws of Registrant.**
C. None.
D. Management Agreement between the Market Opportunity Fund of
Registrant and C & O Funds Advisor, Inc. dated August 20,
1992.*****
E. Form of Distribution Agreement between Registrant and CW Funds
Distributor, Inc. dated _____________, 1999. ********
F. None.
G.1. Custodian Agreement between and Bank One Trust Company , N.A.
dated September 5, 1990.***
G.2. First Amendment to Custodian Agreement between Registrant and
Bank One Trust Company, N.A.*****
G.3. Agreement for Prime Brokerage Clearance Services
between PaineWebber Incorporated and Caldwell & Orkin, Inc.
dated March 28, 1995.
G.4. Agreement for Prime Brokerage Clearance Services
between Furman Selz LLC and Caldwell & Orkin, Inc., dated
March 22, 1996.
G.5. Prime Brokerage Services Agreement between PaineWebber
Incorporated and Caldwell & Orkin, Inc., dated April 9, 1998.
G.6. Agreement for Prime Brokerage Clearance Services
between Merrill Lynch Pierce Fenner and Smith, and Caldwell & Orkin,
Inc., dated May 1, 1998.
H.1. Transfer Agency Agreement between Registrant and MGF Services
Corp. (aka Countrywide Fund Services, Inc.) dated March 3,
1995.*****
H.2. Agreement between Registrant and Caldwell & Orkin, Inc. dated
August 20, 1992.****
H.3. Distribution Plan of Market Opportunity Fund of the
Registrant.*
H.4. Form of Distribution Plan Sub-Agreement.*
H.5. Schedule for Computation of performance quotation.*****
H.6 Power of Attorney appointing H. Eugene Caldwell and Michael B.
Orkin (see Signature Page to this Amendment).******
I. Opinion and consent of counsel, as to legality of shares.*****
J. Consent of Tait, Weller & Baker
K. None.
L. Agreement concerning initial capital of Registrant (Market
Opportunity Fund).*
M. None.
N. None.
O. None.
______________
* 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.
******* Previously filed on August 25, 1996 in connection with
Registrant's Post-Effective Amendment No. 8 to its Registration
Statement on Form N-1A.
******** To be filed by Amendment.
Cadwell & Orkin
Attn: Compliance Dept.
2050 Tower Place
3340 Peachtree Rd.
Atlanta, GA 30326
AGREEMENT FOR
PRIME BROKERAGE CLEARANCE SERVICES
This Agreement sets forth the terms and conditions under which PaineWebber
Incorporated, its successors and assigns ("PaineWebber") will clear your
securities transactions with such broker-dealer as you may designate, from
time to time, as your prime broker (the "Prime Broker"), provided that
PaineWebber has entered into a Prime Brokerage Agreement with such broker-
dealer with respect to your prime brokerage transactions (hereinafter
referred to as "Prime Brokerage Transaction(s)").
1. ESTABLISHMENT OF ACCOUNT
------------------------
PaineWebber will clear your Prime Brokerage Transactions in a broker-dealer
credit account established in the name of your Prime Broker and designated
for your benefit. On the settlement date for each Prime Brokerage
Transaction, PaineWebber will deliver or receive your securities to or from
your Prime Broker against payment in full by or to your Prime Broker on your
behalf.
2. CUSTOMER TRADES
---------------
Your hereby authorize PaineWebber to inform your Prime Broker on the DTC ID
System, or any successor system, of all the details of each Prime Brokerage
Transaction you instruct to be cleared by PaineWebber for your account,
including, but not limited to, the contract amount, the security involved,
the number of shares or number of units, and whether the transaction was a
long or short sale or a purchase (collectively, the "Trade Data"), and you
hereby agree to inform your Prime Broker of the Trade Data on the trade date
by the time designated to you by your Prime Broker. In the event of any
discrepancy in the Trade Data reported to your Prime Broker by you and the
Trade Data reported to your Prime Broker by PaineWebber you shall be
responsible for resolving such discrepancy promptly, and you shall be liable
to PaineWebber for any loss, cost or expense sustained by PaineWebber
arising out of such Prime Brokerage Transaction.
3. APPLICABLE LAW AND REGULATIONS
------------------------------
All Prime Brokerage Transactions shall be subject to all applicable laws and
the rules and regulations of all federal, state, and self-regulatory
agencies including, but not limited to, the Securities and Exchange
Commission, all relevant securities and commodity exchanges, the Municipal
Securities Rulemaking Board, the National Association of Securities Dealers,
the Board of Governors of the Federal Reserve System, and the constitution,
rules and customs of the exchange or market (and its clearing house, if any)
where executed. In addition, all Prime Brokerage Transactions shall be
performed in a manner not inconsistent with the SEC No-Action Letter dated
January 25, 1994 relating to prime brokerage services, which was issued by
the Division of Market Regulation (the "SEC Letter"), as the same may be
amended, modified or supplemented from time to time.
<PAGE>
<PAGE>
4. SHORT SALES
-----------
When placing any order to sell securities short for your account, you are
responsible for designating the order as such, and you hereby authorize
PaineWebber to mark the order as being "short." You further agree to
provide PaineWebber with information concerning any securities borrowing
arrangements made by you and/or your Prime Broker in connection with any
short sales.
5. CUSTOMER QUALIFICATION
----------------------
(a) You understand that you shall be required to maintain in your account
with your Prime Broker such minimum net equity in cash or securities as may
be required, from time to time, by your Prime Broker (the "Minimum Net
Equity"), which shall in no event be less than the minimum net equity
required by the SEC Letter, as such requirement may be amended from time to
time. You further understand that in the event your account falls below
such Minimum Net Equity, you shall bring your account into compliance in a
timely fashion. Each time your enter an order with PaineWebber, you hereby
represent that you shall be in compliance with such Minimum net Equity or
will notify PaineWebber otherwise.
(b) In the event that your Prime Broker indicates its intention to
disaffirm any trade, you hereby authorized and instruct your Prime Broker to
provide to PaineWebber, upon the request of PaineWebber, the following
information: (i) the account or accounts to which any of your orders or
trades relate; (ii) the instructions, if any, provided to your Prime Broker
regarding the allocation of any orders or trades to any sub-accounts; and
(iii) information available to your Prime Broker with respect to any net
equity in the account. In addition, this Agreement will serve as further
authorization and instruction to your Prime Broker to furnish to PaineWebber
in the event of a disaffirmance all such further and additional information
concerning an account as PaineWebber shall request, provided that such
authorization shall have been confirmed by you in a separate letter
addressed and delivered to your Prime Broker and PaineWebber. This
paragraph shall remain in effect so long as this Agreement is in effect,
shall survive the termination of this Agreement and shall apply to all
orders and trades given by you to PaineWebber for clearance and settlement
through your Prime Broker. You hereby agree to release and discharge your
Prime Broker from all responsibility and liability arising out of or
incurred in connection with your Prime Broker furnishing any information to
PaineWebber pursuant to this paragraph.
6. CONFIRMATIONS
-------------
PaineWebber shall confirm the Trade Data to your Prime Broker and shall
issue a confirmation for each Prime Brokerage Transaction by the morning of
the next business day after trade date. As used in this Agreement, the term
"business day" means any day which is not a Saturday or Sunday on which the
New York Stock Exchange, Inc. is open for business. You may direct
PaineWebber to send confirmations to you in care of your Prime Broker; the
form of such directive is attached to this Agreement as Appendix A.
7. CUSTOMER'S SETTLEMENT OBLIGATION
--------------------------------
In the event your Prime Broker indicates its intention not to settle,
or fails to settle, any of your Prime Brokerage Transactions, you shall be
responsible and liable to PaineWebber for settling such Prime Brokerage
Transaction(s) directly with PaineWebber in a margin account that
PaineWebber will open or has opened in your name on its books in accordance
with Regulation T of the Board of Governors of the Federal Reserve System.
PaineWebber shall send you a new confirmation of the replacement
transaction(s).
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8. DISCRETIONARY ACCOUNT
---------------------
(a) If your account is managed on a discretionary basis by an investment
advisor, money manager or other person ("advisor"), you hereby acknowledge
that your prime Brokerage Transactions may be commingled with those of other
accounts of your advisor ("sub-accounts"), according to your advisor's
instructions, for clearance by PaineWebber in a single bulk trade and for
settlement in bulk with your Prime Broker. You further acknowledge that in
the event the Prime Broker indicates its intention not to settle or does not
settle such bulk trade because of one or more sub-accounts receiving an
allocation PaineWebber will either cancel and rebill the bulk trade to
reflect the reduction of the securities which were originally allocated to
the objectionable sub-accounts in accordance with your advisor's
instructions. To facilitate such allocation, PaineWebber may open and carry
an account in your name on its books and you shall be solely responsible and
liable to PaineWebber for settling such transaction directly with
PaineWebber. Your acknowledge that your advisor may resubmit the bulk trade
and execute a corrected allocation of the Prime Brokerage Transaction.
(b) If you are executing this Agreement on behalf of a customer whose
account is managed by you, you hereby represent and covenant to PaineWebber
that (i) each time you execute an order on behalf of such customer, such
customer is in compliance with the Minimum Net Equity or you shall notify
PaineWebber otherwise; (ii) you shall not enter an order for such customer
in the event such customer falls below the Minimum Net Equity; (iii) you
will provide PaineWebber with such information as is necessary to enable
PaineWebber to open up an account for the benefit of such customer by
completing the schedule attached hereto; (iv) you have sufficient knowledge
of such customer to make the representation set forth in paragraph 19 of
this Agreement and (v) you have been duly authorized by the customer to
execute this Agreement, to bind such customer to arbitration, to enter
orders to effect Prime Brokerage Transactions, to execute a directive to
PaineWebber regarding the mailing of confirmations, to disclose such
financial information as PaineWebber deems necessary to effect such
transactions and to take such other actions as are contemplated by this
Agreement.
9. FEES AND CHARGES
----------------
You understand that PaineWebber may charge commissions and other fees for
clearance or any other service furnished to you and you agree to pay such
commissions and fees at PaineWebber's then prevailing rates. You further
understand that service fees, if any, may be changed from time to time, upon
30 days prior written notice to you.
10. RESTRICTIONS ON ACCOUNT
-----------------------
You understand that PaineWebber, in its sole discretion, may refuse to
accept or execute Prime Brokerage Transactions on you behalf or restrict or
prohibit trading of securities in your account(s) with PaineWebber, or
refuse to clear your securities transactions.
11. DEFAULT
-------
If (i) you fail to perform your settlement obligations or in the event your
Prime Broker indicates its intention not to settle, or fails to settle, any
of your Prime Brokerage transactions, as set forth in paragraph 7 of this
Agreement, (ii) any representation made by you shall have been incorrect or
untrue in any material respect when made, (iii) you shall have admitted your
inability to, or intention not to, perform any of your obligations
hereunder, (iv) you file a petition or other proceeding in bankruptcy,
insolvency, or for the appointment of a receiver, or such a petition or
proceeding is filed against you, (v) a levy or an attachment is made against
your account(s) with PaineWebber, (vi) you die, become mentally incompetent
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or you are a corporation that dissolves or (vii) you shall have otherwise
breached the terms of this Agreement (any one being an "Event of Default"),
PaineWebber shall have the right to sell, without prior notice to you, any
and all property in which you have an interest held by or for the benefit of
PaineWebber, to buy any property that may have been sold short, to cancel
any outstanding transactions and/or to purchase or sell any other securities
or other instruments to offset market risk, and you shall be liable to
PaineWebber for all losses, costs and expenses caused by such Event of
Default, together with interest earned thereon from the date of such Event
of Default at the prime rate, until payment in full is received by
PaineWebber.
12. LEGALLY BINDING
---------------
You hereby agree that this Agreement and all terms hereof shall be binding
upon you and your estate, heirs, executors, administrators, personal
representatives, successors and assigns. You agree that all Prime Brokerage
Transactions shall be for your account(s) in accordance with your oral or
written instructions. You hereby waive any and all defenses that any such
instruction was not in writing as may be required by the Statute of Frauds
or any other similar law, rule or regulation.
13. CLEARANCE ACCOUNTS
------------------
In the event your prime Brokerage Transactions are executed by your broker,
who has introduced your account to PaineWebber for clearance services only,
you agree that your broker and its employees are third party beneficiaries
of this Agreement, and that the terms and conditions hereof, including the
Arbitration and Telephone Conversations provisions, shall be applicable to
all matters between or among any of you, your broker and its employees, and
PaineWebber and its employees.
14. MARGIN ACCOUNT, SECURITY INTEREST, CONSENT TO LOAN OR PLEDGE SECURITIES
-----------------------------------------------------------------------
(a) You hereby agree to deposit and maintain such margin in your margin
account as PaineWebber may in its sole discretion require, and you agree to
pay immediately on demand any debit balance therein. Upon your failure to
pay, or at any time PaineWebber deems necessary for its protection, without
prior demand, call or notice, PaineWebber shall be entitled to exercise all
rights and remedies provided herein. Unless you advise us to the contrary,
you represent that you are not an affiliate (as defined in Rule 144(a)(1)
under the Securities Act of 1933) of the issuer or any security held in your
account.
(b) As security for the payment of your obligations to PaineWebber,
PaineWebber shall have a continuing security interest in all property in
which you have an interest held by or for the benefit of PaineWebber and
may, without prior notice to you, apply or transfer any such property. In
the event of a breach or default under this Agreement, PaineWebber shall
have all rights and remedies available to a secured creditor in addition to
the rights and remedies provided herein.
(c) Within the limits of applicable law and regulations, you hereby
authorize PaineWebber to lend either to itself or to others any securities
held by or for the benefit of PaineWebber in your account, together with all
attendant rights of ownership, and to use all such property as collateral
for its general loans. Any such property, together with all attendant
rights of ownership, may be pledged, repledged, hypothecated or
rehypothecated either separately or in common with other such property for
any amounts due to PaineWebber thereon or for a greater sum, and PaineWebber
shall have no obligation to retain a like amount of similar property in its
possession and control.
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(d) You hereby acknowledge receipt of PaineWebber's Statement of Credit
Practices. You understand that interest will be charged on any debit
balances in your account, in accordance with the methods described in such
statement or in any amendment or revision thereto which may be provided to
you. Any debit balance which is not paid at the close of any interest
period will be added to the opening balance for the next interest period.
15. AMENDMENT; ENTIRE AGREEMENT
---------------------------
You agree that PaineWebber may modify the terms of this Agreement at any
time upon prior written notice. If such modifications are unacceptable to
you, you must notify PaineWebber in writing within 30 days of PaineWebber's
transmittal of such notice. Your account may then be terminated by
PaineWebber, after which you agree to remain liable to PaineWebber for all
existing liabilities or obligations. Otherwise, this Agreement may not be
waived or modified absent a written instrument signed by an authorized
representative of PaineWebber. Except as set forth above, this Agreement
represents the entire agreement and understanding between you and
PaineWebber concerning the subject matter hereof.
16. TELEPHONE CONVERSATIONS
-----------------------
For the protection of both you and PaineWebber, and as a tool to correct
misunderstandings, you hereby authorize PaineWebber in its discretion and
without prior notice to you, to monitor and/or record any and all telephone
conversations between you, PaineWebber and any of PaineWebber's employees or
agents. You acknowledge that PaineWebber may determine not to make or keep
such recordings and such determination shall not in any way affect any
party's rights.
17. ASSIGNABILITY
-------------
This Agreement and the rights and obligations arising out of the Prime
Brokerage Transactions cleared pursuant hereto may not be assigned without
the prior written consent of either party, other than by PaineWebber as part
of a general transfer of PaineWebber's business.
18. SEVERABILITY
------------
If any provision of this Agreement is or becomes inconsistent with any
applicable present or future law, rule or regulation, that provision shall
be deemed modified or, if necessary, rescinded in order to comply with the
relevant law, rule or regulation. All other provisions of this Agreement
shall continue to remain in full force and effect.
19. CAPACITY TO CONTRACT; CUSTOMER AFFILIATION
------------------------------------------
You represent that you are of legal age and that, unless you have notified
PaineWebber to the contrary, neither you nor any member of your immediate
family is an employee of any exchange or member thereof, an employee of the
National Association of Securities Dealers, Inc. or a member thereof, an
employee of any corporation, firm or individual engaged in the business of
dealing, as broker or principal, in securities, options or futures, or an
employee of any bank, trust company or insurance company.
20. EXTRAORDINARY EVENTS
--------------------
PaineWebber shall not be held liable for losses caused directly or
indirectly by government restrictions, exchange or market rulings,
suspension of trading, war, strikes or other conditions beyond its control.
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21. HEADINGS
--------
The headings of the provisions hereof are for descriptive purposes only and
shall not modify or qualify any of the rights or obligations set forth in
such provisions.
22. GOVERNING LAW
-------------
This Agreement shall be governed by the laws of the State of New York
without giving effect to the conflicts of law principles thereof.
23. DESIGNATION OF ADVISOR/AGENT
----------------------------
If your account is managed by an advisor, as such term is defined in
paragraph 8(a), or by an agent, and you are executing this agreement, you
hereby authorize __________________ to engage in prime Brokerage
Transactions on your behalf, and you hereby represent and covenant that such
advisor has been duly authorized by you to take such actions as are
contemplated by this Agreement.
24. ARBITRATION DISCLOSURES
-----------------------
ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
* THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING
THE RIGHT TO JURY TRIAL.
* PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT
FROM COURT PROCEEDINGS.
* THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR SEEK MODIFICATION OF
RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED,
* THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MAJORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
25. ARBITRATION
YOU AGREE, AND BY AGREEING TO MAINTAIN AN ACCOUNT IN THE NAME OF YOUR PRIME
BROKER AND DESIGNATED FOR YOUR BENEFIT, PAINEWEBBER AGREES, THAT
CONTROVERSIES ARISING BETWEEN YOU AND PAINEWEBBER, ITS CONTROL PERSON,
PREDECESSORS, SUBSIDIARIES AND AFFILIATES AND ALL RESPECTIVE SUCCESSORS,
ASSIGNS AND EMPLOYEES, WHETHER ARISING PRIOR TO, ON OR SUBSEQUENT TO THE
DATE HEREOF, SHALL BE DETERMINED BY ARBITRATION. ANY ARBITRATION UNDER THIS
AGREEMENT SHALL BE HELD AT THE FACILITIES AND BEFORE AN ARBITRATION PANEL
APPOINTED BY THE NEW YORK STOCK EXCHANGE, INC., THE AMERICAN STOCK EXCHANGE,
INC., OR THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (AND ONLY
BEFORE SUCH EXCHANGES OR ASSOCIATION). YOU MAY ELECT ONE OF THE FOREGOING
FORUMS FOR ARBITRATION, BUT IF YOU FAIL TO MAKE SUCH ELECTION BY REGISTERED
MAIL OR TELEGRAM ADDRESSED TO PAINEWEBBER (OR ANY OTHER ADDRESS OF WHICH YOU
6
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ARE ADVISED IN WRITING), BEFORE THE EXPIRATION OF TEN DAYS AFTER RECEIPT OF
A WRITTEN REQUEST FROM PAINEWEBBER TO MAKE SUCH ELECTION, THEN PAINEWEBBER
MAY MAKE SUCH SELECTION. FOR ANY ARBITRATION SOLELY BETWEEN YOU AND A
BROKER FOR WHICH PAINEWEBBER ACTS AS CLEARING AGENT, SUCH ELECTION SHALL BE
MADE BY REGISTERED MAIL TO SUCH BROKER AT ITS PRINCIPAL PLACE OF BUSINESS.
THE AWARD OF THE ARBITRATORS, OR OF THE MAJORITY OF THEM, SHALL BE FINAL,
AND JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY COURT, STATE OR
FEDERAL HAVING JURISDICTION.
NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION,
NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON
WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION OR WHO IS A MEMBER OF A
PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS
ENCOMPASSED BY THE PUTATTIVE CLASS ACTION UNTIL: (i) THE CLASS CERTIFICATION
IS DENIED; (II) THE CLASS IS DECERTIFIED; OR (III) THE CUSTOMER IS EXCLUDED
FROM THE CLASS BY THE COURT. SUCH FOREBEARANCE TO ENFORCE AN AGREEMENT TO
ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT
EXCEPT TO THE EXTENT STATED HEREIN.
BY SIGNING THIS AGREEMENT YOU ACKNOWLEDGE THAT:
1. THE SECURITIES IN YOUR MARGIN ACCOUNT(S) AND ANY SECURITIES FOR WHICH
YOU HAVE NOT FULLY PAID, TOGETHER WITH ALL ATTENDANT OWNERSHIP RIGHTS, MAY
BE LOANED TO PAINEWEBBER OR LOANED OUT TO OTHERS AND;
2. YOU HAVE RECEIVED A COPY OF THIS AGREEMENT.
THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE AT PARAGRAPH 25.
THIS AGREEMENT IS DATED AS OF MARCH 28, 1995.
/s/ Michael B. Orkin
(Signature)
Michael B. Orkin, President________ Account No.:___________________________
(Typed or Printed Name)
Social Security # or Tax ID: __________
Caldwell& Orkin, Inc.
(Signature)
___________________________________
(Typed or Printed Name)
___________________________________
___________________________________
___________________________________
(Mailing Address)
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PAINEWEBBER INCORPORATED
___________________________________
By:/s/ William A. Graham
Title: V.P.
* If this is a joint account, both names must sign. Persons signing on
behalf of others should indicate the titles or capacities in which they
are signing.
8
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SCHEDULE
LIST OF MANAGED ACCOUNTS COVERED BY PRIME BROKERAGE SERVICES AGREEMENT
CUSTOMER NAME ADDRESS TAX I.D. NO.
Caldwell & Orkin 2050 Tower Place 58-1895283
Aggressive Growth Fund 3340 Peachtree Road
Atlanta, Georgia 30326
Merrill
Caldwell & Orkin
Aggressive Growth Fund Same Same
Lehman
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
C & O Partners Same 58-2073751
Merrill
_________________________ ____________________ ____________________
C & O Partners Same 58-2073751
Lehman
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
9
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APPENDIX A
INSTRUCTIONS REGARDING THE MAILING OF CONFIRMATIONS
- ---------------------------------------------------
The undersigned customer has entered into an Agreement for Prime Brokerage
Clearance Services (the "Agreement") with PaineWebber Incorporated
("PaineWebber") which provides, among other things, that PaineWebber shall
issue a confirmation for each transaction it executes or clears on behalf of
the undersigned, unless the undersigned directs PaineWebber, in writing, to
send confirmations to the undersigned in care of the undersigned's prime
broker.
The undersigned hereby requests that PaineWebber, as executing broker or as
clearing agent for an executing broker, to send confirmations to the
undersigned in care of the undersigned's prime broker. This instrument
shall not be deemed to be either incorporated in or made a part of the
Agreement.
The undersigned acknowledges that if its account is managed on a
discretionary basis by an investment advisor or money manager, each
confirmation may cover a single bulk trade representing transactions that
have been commingled with those of other accounts of the undersigned's
advisor.
By accepting these conditions, PaineWebber hereby acknowledges that this
instrument is not a condition for entering into the Agreement or the prime
brokerage agreement. PaineWebber further agrees that it shall not charge
differential fees based on whether an instruction such as this provided nor
shall PaineWebber otherwise create incentives for the undersigned to execute
this instruments.
____________________________________
(Typed or Printed Name)
____________________________________
(Signature)
____________________________________ Account No: ______________________________
(Typed or Printed Name)
____________________________________ Social Security # or Tax ID ______________
(Signature)
* If this is a joint account, both names must sign. Persons signing on
behalf of others should indicate the titles or capacities in which they
are signing.
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CAPITAL MARKETS
PaineWebber Incorporated
1285 Avenue of the Americas
New York, NY 10019
*SECOND REQUEST*
PAINEWEBBER
September 20, 1994
CALDWELL & ORKIN
ATTN: COMPLIANCE DEPT.
5 PIEDMONT CENTER
SUITE 417
ATLANTA, GA 30305
Recently the Division of Market Regulation of the Securities and Exchange
Commission (the "SEC") issued a no-action letter regarding the applicability
of certain sections and rules of the Securities Exchange Act of 1934 and
Regulation T to prime broker arrangements. The no-action letter specifies
certain conditions that must be met by prime brokers, executing brokers, and
customers in order for those parties to establish and maintain a prime
brokerage arrangement.
Since you have selected PaineWebber Incorporate ("PaineWebber") as an
executing broker to execute your securities transactions and clear those
transactions with your Prime Broker, it will be necessary for you to
complete and execute the enclosed Agreement for Prime Brokerage Clearance
Services (the "Agreement"). The Agreement specifies the obligations and
responsibilities of the parties regarding the prime brokerage arrangement.
The obligations and responsibilities contained in the Agreement are
consistent with the conditions specified in the SEC no-action letter.
Please review the Agreement in its entirety, complete those portions of the
Agreement which pertain to you and, finally, sign and date the Agreement
where indicated. If you elect to have PaineWebber send confirmations of
your transactions to you in care of your Prime Broker, please complete and
execute the Appendix A attached to this statement.
Please return the labeled executed copy of the Agreement to the undersigned;
the second is for your files. In addition, pursuant to the Agreement, we
have enclosed a copy of PaineWebber's Statement of Credit Practices.
Should you have any questions with respect to the Agreement, or the terms
and conditions contained therein, please contact the undersigned at (212)
713-4148.
Very truly yours,
/s/ William A. Graham
William A. Graham
Vice President
11
F U R M A N S E L Z
- ------LLC----------
230 Park Avenue Clearing Agent:
New York, New York 10169 Bear, Stearns Securities Corp.
AGREEMENT FOR
PRIME BROKERAGE CLEARANCE SERVICES
This Agreement sets forth the terms and conditions under which the
above-named clearing agent, its successors and assigns ("Clearing
Agent"), as clearing agent for Furman Selz LLC ("Furman Selz"), will
clear your securities transactions with such broker-dealer as you may
designate, from time to time, as your prime broker ("Prime Broker"),
provided that Clearing Agent has entered into a Prime Brokerage
Agreement with such broker-dealer with respect to your prime brokerage
transactions (hereinafter referred to as "Prime Brokerage Transaction(s)").
1. ESTABLISHMENT OF ACCOUNT
------------------------
Clearing Agent will clear your Prime Brokerage Transactions in a
broker-dealer credit account established in the name of your Prime
Broker and designated for your benefit. On the settlement date for each
Prime Brokerage Transaction, Clearing Agent will deliver or receive your
securities to or from your Prime Broker against payment in full by or to
your Prime Broker on your behalf.
2. CUSTOMER TRADES
---------------
You hereby authorize Clearing Agent to inform your Prime Broker on
the DTC ID System, or any successor system, of all the details for each
Prime Brokerage Transaction you instruct to be cleared by Clearing Agent
for your account, including, but not limited to, the contract amount,
the security involved, the number of shares or number of units, and
whether the transaction was a long or short sale or a purchase
(collectively, the "Trade Data"), and you hereby agree to inform your
Prime Broker of the Trade Data on trade date by the time designated to
you by your Prime Broker. In the event of any discrepancy in the Trade
Data reported to your Prime Broker by you and the Trade Data reported to
your Prime Broker by Clearing Agent, you shall be responsible for
resolving such discrepancy promptly, and you shall be liable to Clearing
Agent for any loss, cost or expense sustained by Clearing Agent arising
out of such Prime Brokerage Transaction.
3. APPLICABLE LAW AND REGULATIONS
------------------------------
All Prime Brokerage Transactions shall be subject to all applicable
laws and the rules and regulations of all federal, state and self-
regulatory agencies including, but not limited to, the Securities and
Exchange Commission, all relevant securities and commodity exchanges,
the Municipal Securities Rulemaking Board, the National Association of
Securities Dealers, the Board of Governors of the Federal Reserve
System, and the constitution, rules and customs of the exchange or
market (and its clearing house, if any) where executed. In addition,
all Prime Brokerage Transactions shall be performed in a manner not
inconsistent with the SEC No Action Letter dated January 25, 1994
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relating to prime brokerage services, which was issued by the Division
of Market Regulation (the "SEC Letter"), as the same may be amended,
modified or supplemented from time to time.
4. SHORT SALES
-----------
When placing any order to sell securities short for your account,
you are responsible for designating the order as such, and you hereby
authorize Clearing Agent and Furman Selz to mark the order as being
"short." You further agree to provide Clearing Agent and Furman Selz
with information concerning any securities borrowing arrangements made
by you and/or your Prime Broker in connection with any short sales.
5. CUSTOMER QUALIFICATION
----------------------
(a) You understand that you shall be required to maintain in
your account with your Prime Broker such minimum net equity in cash or
securities as may be required, from time to time, by your Prime Broker
(the "Minimum Net Equity"), which shall in no event be less than the
minimum net equity required by the SEC Letter, as such requirement may
be amended from time to time (initially: (i) $100,000 in cash or
securities with a ready market, for trades executed on behalf of a
customer account managed by an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940 (a Registered
Investment Adviser-), or (ii) $500,000 in cash or securities with a
ready market for trades executed on behalf of an account not managed by
a Registered Investment Adviser). You further understand that, in the
event your account falls below such Minimum Net Equity, you shall bring
your account into compliance in a timely fashion. Each time you enter
an order with Clearing Agent or Furman Selz, you hereby represent that
you shall be in compliance with such Minimum Net Equity or will notify
Clearing Agent or Furman Selz otherwise.
(b) In the event that your Prime Broker indicates its
intention to disaffirm any trade, you hereby authorize and instruct your
Prime Broker to provide to Clearing Agent, upon the request of Clearing
Agent, the following information: (i) the account or accounts to which
any of your orders or trades relate; (ii) the instructions, if any,
provided to your Prime Broker regarding the allocation of any orders or
trades to any sub-accounts; and (iii) information available to your
Prime Broker with respect to any net equity in the account. In
addition, this Agreement will serve as further authorization and
instruction to your Prime Broker to furnish to Clearing Agent in the
event of a disaffirmance all such further and additional information
concerning an account as Clearing Agent shall request, provided that
such authorization shall have been confirmed by you in a separate letter
addressed and delivered to your Prime Broker and Clearing Agent. This
paragraph shall remain in effect so long as this Agreement is in effect,
shall survive the termination of this Agreement and shall apply to all
orders and trades given by you to Clearing Agent for clearance and
settlement through your Prime Broker. You hereby agree to release and
discharge your Prime Broker from all responsibility and liability
arising out of or incurred in connection with your grime Broker
furnishing any information to Clearing Agent pursuant to this paragraph.
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6. CONFIRMATION
------------
Clearing Agent shall confirm the Trade Data to your Prime Broker
and shall issue a confirmation for each Prime Brokerage Transaction by
the morning of the next business day after trade date. As used in this
Agreement, the term Business Day means any day which is not a Saturday
or Sunday on which The New York Stock Exchange, Inc. is open for
business. You may direct Clearing Agent to send confirmations to you in
care of your Prime Broker; the form of such directive may be obtained
from Clearing Agent and appended to this Agreement.
7. CUSTOMER'S SETTLEMENT OBLIGATION
--------------------------------
In the event your Prime Broker indicates its intention not to
settle, or fails to settle, any of your Prime Brokerage Transactions,
you shall be responsible and liable to Clearing Agent for settling such
Prime Brokerage Transaction directly with Clearing Agent in a margin
account that Clearing Agent will open or has opened in your name on its
books in accordance with Regulation T of the Board of Governors of the
Federal Reserve System. Clearing Agent shall send you a new
confirmation of the replacement transaction.
8. DISCRETIONARY ACCOUNT
---------------------
(a) If your account is managed on a discretionary basis by an
investment adviser, money manager or other person ("adviser"), you
hereby acknowledge that your Prime Brokerage Transactions may be
commingled with those of other accounts of your adviser ("sub-
accounts"), according to your adviser's instructions, for clearance by
Clearing Agent in a single bulk trade and for settlement in bulk with
your Prime Broker. You further acknowledge that in the event your Prime
Broker indicates its intention not to settle or does not settle such
bulk trade because of one or more subaccounts receiving an allocation,
Clearing Agent will either cancel and rebill the bulk trade to reflect
the reduction of the securities which were originally allocated to the
objectionable sub-accounts or, if permissible, execute a corrected
allocation of the Prime Brokerage Transaction to sub-accounts in
accordance with your adviser's instructions. To facilitate such
allocation, Clearing Agent may open and carry an account in your name on
its books and you shall be solely responsible and liable to Clearing
Agent for selling such transaction directly with Clearing Agent. You
acknowledge that your adviser may resubmit the bulk trade and execute a
corrected allocation of the Prime Brokerage Transaction.
(b) If you are executing this Agreement on behalf of a
customer whose account is managed by you, you hereby represent and
covenant to Clearing Agent that: (i) each time you execute an order on
behalf of such customer, such customer is in compliance with the Minimum
Net Equity or you shall notify Clearing Agent otherwise; (ii) you shall
not enter an order for such customer in the event such customer falls
below the Minimum Net Equity; (iii) you will provide Clearing Agent with
the customer's name, address and Tax I.D. Number to enable Clearing
Agent to open and maintain an account for the benefit of such customer;
(iv) you have sufficient knowledge of such customer to make the
representation set forth in paragraph 19 of this Agreement and; (v) you
have been duly authorized by the customer to execute this Agreement, to
bind such customer to arbitration, to enter orders to effect Prime
Brokerage Transactions, to execute a directive to Clearing Agent
regarding the mailing of confirmations, to disclose such financial
information as Clearing Agent deems necessary to effect such
transactions and to take such other actions as are contemplated by this
Agreement.
3
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<PAGE>
9. FEES AND CHARGES
----------------
You understand that Clearing Agent and Furman Selz may charge
commissions and other fees for clearance or any other services furnished
to you and you hereby agree to pay such commissions and fees at the then
prevailing rates of Clearing Agent or Furman Selz, as the case may be.
You further understand that service fees, if any, may be changed from
time to time, upon 30 days prior written notice to you.
10. RESTRICTIONS ON ACCOUNT
-----------------------
You understand that Clearing Agent, in its sole discretion, may
refuse to accept or execute Prime Brokerage Transactions on your behalf
or restrict or prohibit trading of securities in your account(s) with
Clearing Agent, or refuse to clear your securities transactions.
11. DEFAULT
-------
If (i) you fail to perform your settlement obligations or in the
event your Prime Broker indicates its intention not to settle, or fails
to settle, any of your Prime Brokerage Transactions, as set forth in
paragraph 7 of this Agreement, (ii) any representation made by you shall
have been incorrect or untrue in any material respect when made, (iii)
you shall have admitted your inability to, or intention not to, perform
any of your obligations hereunder, (iv) you file a petition or other
proceeding in bankruptcy, insolvency, or for the appointment of a
receiver, or such a petition or proceeding is filed against you, (v) a
levy of an attachment is made against your account(s) with Clearing
Agent, (vi) you die or become mentally incompetent or you are a
corporation that dissolves, or (vii) you shall have otherwise breached
the terms of this Agreement (any one being an "Event of Default"),
Clearing Agent shall have the right to sell, without prior notice to
you, any and all property in which you have an interest held by or for
the benefit of Clearing Agent, to buy any property that may have been
sold short, to cancel any outstanding transactions and/or to purchase or
sell any other securities or other instruments to offset market risk,
and you shall be liable to Clearing Agent for all losses, costs and
expenses caused by such Event of Default, together with interest earned
thereon from the date of such Event of Default at the prime rate, until
payment in full is received by Clearing Agent.
12. LEGALLY BINDING
---------------
You hereby agree that this Agreement and all the terms hereof shall
be binding upon you and your estate, heirs, executors, administrators,
personal representatives, successors and assigns. You agree that all
Prime Brokerage Transactions shall be for your account(s) in accordance
with your oral or written instructions. You hereby waive any and all
defenses that any such instructions were not in writing as may be
required by the Statute of Frauds or any other similar law, rule or
regulation.
13. CLEARANCE ACCOUNTS
------------------
You hereby agree that because your Prime Brokerage Transactions are
executed by Furman Selz, who has introduced your account to Clearing
Agent for clearance services only, you agree that Furman Selz and its
employees are third party beneficiaries of this Agreement, and that the
terms and conditions hereof, including, but not limited to, the
Arbitration and Telephone Conversations provisions, shall be applicable
to all matters between or among any of you, Furman Selz and its
employees, and Clearing Agent and its employees.
4
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14. MARGIN ACCOUNT, SECURITY INTEREST, CONSENT TO LOAN OR PLEDGE SECURITIES
-----------------------------------------------------------------------
(a) You hereby agree to deposit and maintain such margin in
your margin account as Clearing Agent may in its sole discretion
require, and you agree to pay immediately on demand any debit balance
therein. Upon your failure to pay, or at any time Clearing Agent deems
necessary for its protection, without prior demand, call or notice,
Clearing Agent shall be entitled to exercise all rights and remedies
provided herein. Unless you advise us to the contrary, you represent
that you are not an affiliate (as defined in Rule 144(a) (1 ) under the
Securities Act of 1933) of the issuer of any security held in your
account.
(b) As security for the payment of your obligations to
Clearing Agent, Clearing Agent shall have a continuing security interest
in all property in which you have an interest held by or for the benefit
of Clearing Agent and may, without prior notice to-you, use, apply or
transfer any such property in the event of a breach or default under
this Agreement Clearing Agent shall have-all rights and remedies
available to a secured creditor in addition; to the rights and remedies
provided herein.
(c) Within the limits of applicable law and regulations, you
hereby authorize Clearing Agent to lend either to itself or to others
any securities held by or for the benefit of Clearing Agent in your
account, together with all attendant rights of ownership, and to use all
such property as collateral for its general loans. Any such property;
together with all attendant rights of ownership, may be pledged,
repledged, hypothecated or rehypothecated either separately or in common
with other such property for any amounts due to Clearing Agent thereon
or for a greater sum, and Clearing Agent shall have no obligation to
retain a like amount of similar property in its possession and control.
(d) You hereby acknowledge receipt of Clearing Agent's Truth-
in-Lending disclosure statement. You understand that interest will be
charged on any debit balances in your account, in accordance with the
methods described in such statement or in any amendment or revision
thereto which may be provided to you. Any interest charged on your
debit balance which is not paid at the close of an interest period will
be added to the opening balance for the next interest period.
15. AMENDMENT; ENTIRE AGREEMENT
---------------------------
You agree that Clearing Agent may modify the terms of this
Agreement at any time upon prior written notice. If such modifications
are unacceptable to you, you must notify Clearing Agent in writing
within 30 days of Clearing Agent's transmittal of such notice. Your
account may then be terminated by Clearing Agent, after which you agree
to remain liable to Clearing Agent for all existing liabilities or
obligations. Otherwise this Agreement may not be waived or modified
absent a written instrument signed by an authorized representative of
Clearing Agent. Except as set forth above, this Agreement represents
the entire agreement and understanding between you and Clearing Agent
concerning the subject matter hereof.
5
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<PAGE>
16. GOVERNING LAW
-------------
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE INDICATED
ON THE SIGNATURE PAGE HERETO WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAW PRINCIPLES THEREOF.
17. ASSIGNABILITY
-------------
This Agreement and the rights and obligations arising out of the
Prime Brokerage Transactions cleared pursuant hereto may not be assigned
without the prior written consent of the other party, other than by
Clearing Agent as part of a general transfer of Clearing Agent's
business.
18. SEVERABILITY
------------
If any provision of this Agreement is or becomes inconsistent with
any applicable present or future law, rule or regulation, that provision
shall be deemed modified or, if necessary, rescinded in order to comply
with the relevant law, rule or regulation. All other provisions of this
Agreement shall continue to remain in full force and effect.
19. CAPACITY TO CONTRACT; CUSTOMER AFFILIATION
------------------------------------------
You represent that you are of legal age and that, unless you have
notified Clearing Agent to the contrary, neither you nor any member of
your immediate family is an employee of any exchange or member thereof,
an employee of the National Association of Securities Dealers, Inc. or a
member thereof, an employee of any corporation, firm or individual
engaged in the business of dealing, as broker or principal, in
securities, options or futures, or an employee of any bank, trust
company or insurance company.
20. EXTRAORDINARY EVENTS
--------------------
Clearing Agent shall not be liable for losses caused directly or
indirectly by government restrictions, exchange or market rulings,
suspension of trading, war, strikes or other conditions beyond its
control.
21. HEADINGS
--------
The headings of the provisions hereof are for descriptive purposes
only and shall not modify or qualify any of the rights or obligations
set forth in such provisions.
22. TELEPHONE CONVERSATIONS
-----------------------
For the protection of both you and Clearing Agent, and as a tool to
correct misunderstandings, you hereby authorize Clearing Agent in its
discretion and without prior notice to you, to monitor and/or record any
or all telephone conversations between you, Clearing Agent and any of
Clearing Agent's employees or agents. You acknowledge that Clearing
Agent may determine not to make or keep such recordings and such
determination shall not in any way affect any party's rights.
6
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<PAGE>
23. ARBITRATION
-----------
* ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
* THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO JURY TRIAL.
* PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND
DIFFERENT FROM COURT PROCEEDINGS.
* THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS
OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK
MODIFICATION OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
* THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF
ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES
INDUSTRY.
* NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO
ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION
AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A
PUTATIVE CLASS ACTION OR WHO IS A MEMBER OF A PUTATIVE CLASS WHO
HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS
ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL:
(i) the class certification is denied;
(ii) the class is decertified; or
(iii) the customer is excluded from the class by the court.
Such forbearance to enforce an agreement to arbitrate shall
not constitute a waiver of any rights under this Agreement
except to the extent stated herein.
YOU AGREE, AND BY INTRODUCING YOUR ACCOUNT, FURMAN SELZ AGREES, AND BY
AGREEING TO MAINTAIN AN ACCOUNT IN THE NAME OF YOUR PRIME BROKER AND
DESIGNATED FOR YOUR BENEFIT, CLEARING AGENT AGREES, THAT CONTROVERSIES
ARISING BETWEEN YOU AND FURMAN SELZ, ITS CONTROL PERSONS, PREDECESSORS,
SUBSIDIARY" AND AFFILIATES AND ALL RESPECTIVE SUCCESSORS, ASSIGNS AND
EMPLOYEES, OR BETWEEN YOU AND CLEARING AGENT, ITS CONTROL PERSONS,
PREDECESSORS, SUBSIDIARIES AND AFFILIATES AND ALL RESPECTIVE SUCCESSORS,
ASSIGNS AND EMPLOYEES, WHETHER ARISING PRIOR TO, ON OR SUBSEQUENT TO THE
DATE HEREOF, SHALL BE DETERMINED BY ARBITRATION. ANY ARBITRATION UNDER
THIS AGREEMENT SHALL BE HELD AT THE FACILITIES AND BEFORE AN ARBITRATION
PANEL APPOINTED BY THE NEW YORK STOCK EXCHANGE, INC., OR IF THE
7
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TRANSACTION WHICH GIVES RISE TO SUCH CONTROVERSY IS EFFECTED IN ANOTHER
UNITED STATES MARKET WHICH PROVIDES ARBITRATION FACILITIES, BEFORE SUCH
OTHER FACILITIES. YOU MAY ELECT ONE OF THE FOREGOING FORUMS FOR
ARBITRATION, BUT IF YOU FAIL TO MAKE SUCH ELECTION BY REGISTERED MAIL OR
TELEGRAM ADDRESSED IN THE CASE OF FURMAN SELZ TO FURMAN SELZ LLC AT 230
PARK AVENUE, NEW YORK, NEW YORK 10169, ATTENTION: DIRECTOR, COMPLIANCE
DEPARTMENT OR, IN THE CASE OF CLEARING AGENT TO BEAR, STEARNS SECURITIES
CORP. AT ONE METROTECH CENTER NORTH, BROOKLYN, NEW YORK 11201-3859,
ATTENTION: CHIEF LEGAL OFFICER (OR ANY OTHER ADDRESS OF WHICH YOU ARE
ADVISED IN WRITING), BEFORE THE EXPIRATION OF TEN DAYS AFTER RECEIPT OF
A WRITTEN REQUEST FROM FURMAN SELZ OR CLEARING AGENT (AS THE CASE MAY
BE) TO MAKE SUCH ELECTION, THEN FURMAN SELZ OR CLEARING AGENT (AS THE
CASE MAY BE) MAY MAKE SUCH ELECTION. THE AWARD OF THE ARBITRATORS, OR
OF THE MAJORITY OF THEM, SHALL BE FINAL, AND JUDGMENT UPON THE AWARD
RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING
JURISDICTION.
BY SIGNING THIS AGREEMENT YOU ACKNOWLEDGE THAT:
1. THE SECURITIES IN YOUR MARGIN ACCOUNT AND ANY SECURITIES FOR WHICH
YOU HAVE NOT FULLY PAID, TOGETHER WITH ALL ATTENDANT OWNERSHIP RIGHTS,
MAY BE LOANED TO CLEARING AGENT OR LOANED OUT TO OTHERS; AND
2. YOU HAVE RECEIVED A COPY OF THIS AGREEMENT.
THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE AT PARAGRAPH
23.
* If your account is managed by an adviser, as such term is defined
in paragraph 8(a), or by an agent, and you are executing this
Agreement, you hereby authorize (Caldwell & Orking, Inc.) to
engage in Prime Brokerage Transactions on your behalf, and you
hereby represent and covenant that such advisor has been duly
authorized by you to take such actions as are contemplated by
this Agreement.
* If this is a loins Account, both parties must sign. Persons
signing on behalf of others should indicate the titles or
capacities in which they are signing.
8
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<PAGE>
This Agreement is dated as of March 22, 1996.
/s/ Michael B. Orkin, President
Caldwell & Orkin, Inc.
Typed or Printed Name
Michael B. Orkin
_____________________________________
Signature
_____________________________________
Typed or Printed Name
_____________________________________
Signature
_____________________________________
_____________________________________
Mailing Address
Accepted by: ________________________
Clearing Agent
Date: _______________________________
Account No.: ________________________
Social Security # Or Tax ID: ________
Agreement Governed by the laws of the State of New York.
9
Caldwell & Orkin Inc.
3340 Peachtree RD., NE
Atlanta, GA 30326
PRIME BROKERAGE SERVICES AGREEMENT
This Agreement sets forth the terms and conditions under which PaineWebber
Incorporated, its successors and assigns ("PaineWebber") will clear your
securities transactions with such broker-dealer as you may designate, from
time to time, as your executing broker ("Executing Broker") provided that
PaineWebber has entered into a Prime Brokerage Agreement with such broker-
dealer with respect to your prime brokerage transactions (hereinafter
referred to as "Prime Brokerage Transaction(s)").
1. ESTABLISHMENT OF ACCOUNT
------------------------
PaineWebber will clear Prime Brokerage Transactions in your account on
PaineWebber's books which were executed by the designated Executing Broker
in a broker-dealer credit account established in PaineWebber's name and
designated for your benefit on the books of the Executing Broker. On the
settlement date for each Prime Brokerage Transaction, PaineWebber will
deliver or receive your securities to or from your Executing Broker against
payment in fill by or to your Executing Broker on your behalf.
2. CUSTOMER TRADES
---------------
Your hereby agree to inform PaineWebber of all the details of each Prime
Brokerage Transaction executed through the Executing Broker for your
account, including, but not limited to, the contract amount, the security
involved, the number of shares or number of units, and whether the
transaction was a long or short sale or a purchase (collectively, the "Trade
Data") by 5:00 p.m. New York time on trade date. In the event of any
discrepancy in the Trade Data reported to PaineWebber by you and the Trade
Data reported to PaineWebber by the Executing Broker under the Prime
Brokerage Agreement, you shall be responsible for resolving such discrepancy
promptly, and you shall be liable to PaineWebber for any loss, cost or
expense sustained by PaineWebber arising out of such Prime Brokerage
Transaction. Where the Executing Broker is forwarding trade confirmations
to you in care of PaineWebber pursuant to your written instructions,
PaineWebber upon request will promptly provide you with copies of these
confirmations.
3. APPLICABLE LAW AND REGULATIONS
------------------------------
All Prime Brokerage Transactions shall be subject to all applicable laws
and the rules and regulations of all federal, state and self-regulatory
agencies, including, but not limited to, the Securities and Exchange
Commission, all relevant securities and commodity exchanges, the Municipal
Securities Rulemaking Board, the National Association of Securities Dealers,
the Board of Governors of the Federal Reserve System, and the constitution,
rules and customs of the exchange or market (and its clearing house, if any)
where executed. In addition, all Prime Brokerage Transactions shall be
performed in a manner not inconsistent with the SEC No-Action Letter dated
January 25, 1994 relating to prime brokerage services, which was issued by
the Division of Market Regulation (the "SEC Letter"), as the same may be
amended, modified or supplemented from time to time.
<PAGE>
<PAGE>
4. CUSTOMER QUALIFICATION
----------------------
You agree to maintain in your account with PaineWebber such minimum net
equity in cash or securities as may be required, from time to time, by
PaineWebber (the "Minimum Net Equity"), which shall in no event be less than
the minimum net equity required by the SEC Letter, as such requirement may
be amended from time to time. If the net equity in your account is less
than the Minimum Net Equity on any business day you agree to restore the net
equity in your account to the Minimum Net Equity by 12:00 noon on the fifth
business day following that date. If such Minimum Net Equity is not
restored by that date, this Agreement will be terminated effective the close
of business that day. As used in this Agreement the term "business day"
means any day which is not a Saturday or Sunday on which the New York Stock
Exchange, Inc. is open for business.
5. RIGHT TO DISAFFIRM; CUSTOMER'S SETTLEMENT OBLIGATION
----------------------------------------------------
PaineWebber reserves the right to disaffirm or refuse to clear and settle
any Prime Brokerage Transaction with you. Notice of disaffirmance will be
sent to you and your Executing Broker promptly but in any event no later
than the close of business on the business day after the trade date of the
transaction if PaineWebber has received the Executing Broker's confirmation
by 12:00 noon on that day. If the Executing Broker's confirmation is not
received by 12:00 noon the next business day, the notice of disaffirmance
will be sent by close of business the day after the executing Broker's
confirmation is received. Pursuant to the Prime Brokerage Agreement with
your Executing Broker, such disaffirmance of one Prime Brokerage Transaction
will cause all transactions on that trade date and the prior trade day to be
disaffirmed. In the event PaineWebber indicates its intention not to
settle, or fails to settle, any of your Prime Brokerage Transactions, you
shall be responsible and liable for settling such Prime Brokerage
Transaction directly with the Executing Broker.
6. DISCRETIONARY ACCOUNT
---------------------
(a) If your account is managed on a discretionary basis by an investment
advisor, money manager or other person ("advisor") you hereby acknowledge
that your Prime Brokerage Transactions may be commingled with those of other
accounts of your advisor ("sub-accounts"), according to your advisor's
instructions, for clearance by the Executing Broker in a single bulk trade
and for settlement in bulk with PaineWebber.
(b) If you are executing this Agreement on behalf of a customer whose
account is managed by you, you hereby represent and covenant to PaineWebber
that (i) you have sufficient knowledge of such customer to make the
representation set forth in paragraph 13 of this Agreement and (ii) you have
been duly authorized by the customers identified on the attached Schedule to
execute this Agreement, to bind such customer to arbitration, to enter
orders to effect Prime Brokerage Transactions, and to take such other
actions as are contemplated by this Agreement
7. DEFAULT
-------
If (i) any representation made by you shall have been incorrect or untrue in
any material respect when made, (ii) you shall have admitted your inability
to, or intention not to, perform any of your obligations hereunder, (iii)
you file a petition or other proceeding in bankruptcy, insolvency, or for
the appointment of a receiver, or such a petition or proceeding is filed
against you, (iv) a levy or an attachment is made against your account(s)
with PaineWebber, (v) you die, become mentally incompetent or you are a
corporation that dissolves, or (vi) you shall have otherwise breached the
terms of this Agreement (any one being an "Event of Default"), PaineWebber
shall have the right to sell, without prior notice to you, any and all
property in which you have an interest held by or for the benefit of
PaineWebber, to buy any property that may have been sold short, to cancel
any outstanding transactions and/or to purchase or sell any other securities
or other Instruments to offset market risk, and you shall be liable to
2
<PAGE>
<PAGE>
PaineWebber for all losses, costs and expenses caused by such Event of
Default, together with interest earned thereon from the date of such Event
of Default at the prime rate, until payment in full is received by
PaineWebber.
8. LEGALLY BINDING
---------------
You hereby agree that this Agreement and all the terms hereof shall be
binding upon you and your estate, heirs, executors, administrators, personal
representatives, successors and assigns. You agree that all Prime Brokerage
Transactions shall be for you account(s) in accordance with your oral or
written instructions. You hereby waive any and all defenses that any such
instruction was not in writing as may be required by the Statute of Frauds
or any other similar law, rule or regulation.
9. AMENDMENT; ENTIRE AGREEMENT
---------------------------
You agree that PaineWebber may modify the terms of this Agreement at any
time upon written nonce. If such modifications are unacceptable to you, you
must notify PaineWebber in writing within 30 days of the transmittal of such
notice. Your account may then be terminated by PaineWebber after which you
agree to remain liable to PaineWebber for all existing liabilities or
obligations. Otherwise, this Agreement may not be waived or modified absent
a written instrument signed by an authorized representative of PaineWebber.
Except as set forth above, this Agreement represents the entire agreement
and understanding between you and PaineWebber concerning the subject matter
hereof.
10. TELEPHONE CONVERSATIONS
-----------------------
For the protection of both you and PaineWebber, and as a tool to correct
misunderstandings, you hereby authorize PaineWebber in its discretion and
without prior notice to you to monitor and/or record any or all telephone
conversations between you, PaineWebber and any of PaineWebber's employees or
agents. You acknowledge that PaineWebber may determine not to make or keep
such recordings and such determination shall not in any way affect any
party's rights.
11. ASSIGNABILITY
-------------
This Agreement and the rights and obligations arising out of the Prime
Brokerage Transactions cleared pursuant hereto may not be assigned without
the prior written consent of the other company, other than by PaineWebber as
part of a general transfer of PaineWebber's business.
12. SEVERABILITY
------------
If any provision of this Agreement is or becomes inconsistent with any
applicable present or future law, rule or regulation, that provision shall
be deemed modified or, if necessary, rescinded in order to comply with the
relevant law, rule or regulation. All other provisions of this Agreement
shall continue to remain in full force and effect.
13. CAPACITY TO CONTRACT; CUSTOMER AFFILIATION
------------------------------------------
You represent that you are of legal age and that, unless you have notified
PaineWebber to the contrary, neither you nor any member of your immediate
family is an employee of any exchange or member thereof, an employee of the
National Association of Securities Dealers, Inc. or a member thereof, an
employee of any corporation, firm or individual engaged in the business of
dealing, as broker or principal, in securities, options or futures, or an
employee of any bank, trust company or insurance company.
3
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<PAGE>
14. EXTRAORDINARY EVENTS
--------------------
PaineWebber shall not be liable for losses caused directly or indirectly by
government restrictions, exchange or market rulings, suspension of trading,
war, strikes or other conditions beyond its control.
15. HEADINGS
--------
The headings of the provisions hereof are far descriptive purposes only and
shall not modify or qualify any of the rights or obligations set forth in
such provisions.
16. GOVERNING LAW
-------------
This Agreement shall be governed by the laws of the State of New York
without giving effect to the conflicts of law principles thereof.
17. DESIGNATION OF ADVISOR/AGENT
----------------------------
If your account is managed by an advisor, as such term is defined in
paragraph 6(a), or by an agent, and you are executing this agreement, you
hereby authorize ___________________________ to engage in Prime Brokerage
Transactions on your behalf, and you hereby request and covenant that such
advisor has been duly authorized by you to take such actions as are
contemplated by this agreement.
18. ARBITRATION DISCLOSURES
-----------------------
ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE
RIGHT TO JURY TRIAL.
PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM
COURT PROCEEDINGS.
THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING AND ANY PARTY'S RIGHT TO APPEAL OR SEEK MODIFICATION OF RULINGS
BY THE ARBITRATORS IS STRICTLY LIMITED,
THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MAJORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
19. ARBITRATION
-----------
YOU AGREE, AND BY CARRYING AN ACCOUNT AS PRIME BROKER FOR YOU, PAINEWEBBER
AGREES THAT CONTROVERSIES ARISING BETWEEN YOU AND PAINEWEBBER, ITS CONTROL
PERSON, PREDECESSORS, SUBSIDIARIES AND AFFILIATES AND ALL RESPECTIVE
SUCCESSORS, ASSIGNS AND EMPLOYEES, WHETHER ARISING PRIOR TO, ON OR
SUBSEQUENT TO THE DATE HEREOF, SHALL BE DETERMINED BY ARBITRATION. ANY
ARBITRATION UNDER THIS AGREEMENT SHALL BE HELD AT THE FACILITIES AND BEFORE
AN ARBITRATION PANEL APPOINTED BY THE NEW YORK STOCK EXCHANGE, INC., THE
AMERICAN STOCK EXCHANGE, INC., OR THE NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC. (AND ONLY BEFORE SUCH EXCHANGES OR ASSOCIATION). YOU MAY
4
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ELECT ONE OF THE FOREGOING FORUMS FOR ARBITRATION, BUT IF YOU FAIL TO MAKE
SUCH ELECTION BY REGISTERED MAIL OR TELEGRAM ADDRESSED TO THE PAINEWEBBER
(OR ANY OTHER ADDRESS OF WHICH YOU ARE ADVISED IN WRITING), BEFORE THE
EXPIRATION OF TEN DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM PAINEWEBBER
TO MAKE SUCH ELECTION, THEN PAINEWEBBER MAY MAKE SUCH ELECTION. THE AWARD
OF THE ARBITRATORS, OR OF THE MAJORITY OF THEM, SHALL BE FINAL, AND JUDGMENT
UPON THE AWARD RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL HAVING
JURISDICTION.
NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION,
NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON
WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION OR WHO IS A MEMBER OF A
PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS
ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL: (I) THE CLASS CERTIFICATION
IS DENIED; (II) THE CLASS IS DECERTIFIED; OR (III) THE CUSTOMER IS EXCLUDED
FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO
ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT
EXCEPT TO THE EXTENT STATED HEREIN.
BY SIGNING THIS AGREEMENT YOU ACKNOWLEDGE THAT YOU HAVE RECEIVED A COPY OF
THIS AGREEMENT.
THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE AT PARAGRAPH 19.
THIS AGREEMENT IS DATED AS OF 09 April, 1998.
MICHAEL ORKIN
(Typed or Printed Name)
/s/ Michael B. Orkin Account No.: IJ - 40903 - CS
(Signature)
_______________________________ Social Security # or Tax ID: 58-189-5283
(Typed or Printed Name)
_______________________________
(Signature)
2050 Tower Place
3340 Peachtree Road, NE
Atlanta GA 30326
(Mailing Address)
PAINEWEBBER INCORPORATED
- ------------------------
By:__________________________________
Title:_______________________________
If this is a joint account, both names must sign. Persons signing on behalf
of others should indicate the titles or capacities in which they are
signing.
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SCHEDULE
LIST OF MANAGED ACCOUNTS COVERED BY PRIME BROKERAGE SERVICES AGREEMENT
CUSTOMER NAME ADDRESS TAX I.D. NO.
Common Sense Partners Oregon (Portland) ____________________
C&O Investment Same as IJ 40903 ____________________
Partnership
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
_________________________ ____________________ ____________________
6
AGREEMENT FOR
PRIME BROKERAGE CLEARANCE SERVICES
This Agreement sets forth the terms and conditions under which MERRILL
LYNCH PIERCE FENNER AND SMITH, its successors and assigns (the "Clearing
Broker"), will clear your securities transactions with such broker-
dealer as you may designate, from time to time, as your prime broker
("Prime Broker"), provided that Clearing Broker has entered into a Prime
Brokerage Agreement with such broker-dealer with respect to your prime
brokerage transactions (hereinafter referred to as "Prime Brokerage
Transaction(s)").
1. ESTABLISHMENT OF ACCOUNT
------------------------
Clearing Broker will clear your Prime Brokerage Transactions in a
broker-dealer credit account established in the name of your Prime
Broker and designated for your benefit. On the settlement date for each
Prime Brokerage Transaction, Clearing Broker will deliver or receive
your securities to or from your Prime Broker against payment in full by
or to your Prime Broker on your behalf.
2. CUSTOMER TRADES
---------------
You hereby authorize Clearing Broker to inform your Prime Broker on
the DTC I.D. System, or any successor system, of all the details for
each Prime Brokerage Transaction you instruct to be cleared by Clearing
Broker for your account, including, but not limited to, the contract
amount, the security involved, the number of shares or number of units,
and whether the transaction was a long or short sale or a purchase
(collectively, the "Trade Data"), and you hereby agree to inform your
Prime Broker of the Trade Data on trade date by the time designated to
you by your Prime Broker. In the event of any discrepancy in the Trade
Data reported to your Prime Broker by you and the Trade Data reported to
your Prime Broker by Clearing Broker, you shall be responsible for
resolving such discrepancy promptly, and you shall be liable to Clearing
Broker for any loss, cost or expense sustained by Clearing Broker
arising out of such Prime Brokerage Transaction.
3. APPLICABLE LAW AND REGULATIONS
------------------------------
All Prime Brokerage Transactions shall be subject to all applicable
laws and the rules and regulations of all federal, state and self-
regulatory agencies including, but not limited to, the Securities and
Exchange Commission, all relevant securities and commodity exchanges,
the Municipal Securities Rulemaking Board, the National Association of
Securities Dealers, the Board of Governors of the Federal Reserve
System, and the constitution, rules and customs of the exchange or
market (and its clearing house, if any) where executed. In addition,
all Prime Brokerage Transactions shall be performed in a manner not
inconsistent with the SEC No Action Letter dated January 25, 1994
relating to prime brokerage services, which was issued by the Division
of Market Regulation (the "SEC Letter"), as the same may be amended,
modified or supplemented from time to time.
4. SHORT SALES
-----------
When placing any order to sell securities short for your account,
you are responsible for designating the order as such, and you hereby
authorize Clearing Broker to mark the order as being "short." You
further agree to provide Clearing Broker with information concerning any
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securities borrowing arrangements made by you and/or your Prime Broker
in connection with any short sales.
5. CUSTOMER QUALIFICATION
----------------------
(a) You understand that you shall be required to maintain in
your account with your Prime Broker such minimum net equity in cash or
securities as may be required, from time to time, by your Prime Broker
(the "Minimum Net Equity"), which shall in no event be less than the
minimum net equity required by the SEC Letter, as such requirement may
be amended from time to time (initially: (i) $100,000 in cash or
securities with a ready market, for trades executed on behalf of a
customer account managed by an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940 (a "Registered
Investment Adviser"), or (ii) $500,000 in cash or securities with a
ready market for trades executed on behalf of an account not managed by
a Registered Investment Adviser). You further understand that, in the
event your account falls below such Minimum Net Equity, you shall bring
your account into compliance in a timely fashion. Each time you enter
an order with Clearing Broker you hereby represent that you shall be in
compliance with such Minimum Net Equity or will notify Clearing Broker
otherwise.
(b) In the event that your Prime Broker indicates its
intention to disaffirm any trade, you hereby authorize and instruct your
Prime Broker to provide to Clearing Broker, upon the request of Clearing
Broker, the following information: (i) the account or accounts to which
any of your orders or trades relate; (ii) the instructions, if any,
provided to your Prime Broker regarding the allocation of any orders or
trades to any sub-accounts; and (iii) information available to your
Prime Broker with respect to any net equity in the account. In
addition, this Agreement will serve as further authorization and
instruction to your Prime Broker to furnish to Clearing Broker in the
event of a disaffirmance all such further and additional information
concerning an account as Clearing Broker shall request, provided that
such authorization shall have been confirmed by you in a separate letter
addressed and delivered to your Prime Broker and Clearing Broker. This
paragraph shall remain in effect so long as this Agreement is in effect,
shall survive the termination of this Agreement and shall apply to all
orders and trades given by you to Clearing Broker for clearance and
settlement through your Prime Broker. You hereby agree to release and
discharge your Prime Broker from all responsibility and liability
arising out of or incurred in connection with your grime Broker
furnishing any information to Clearing Broker pursuant to this
paragraph.
6. CONFIRMATION
------------
Clearing Broker shall confirm the Trade Data to your Prime Broker
and shall issue a confirmation for each Prime Brokerage Transaction by
the morning of the next business day after trade date. As used in this
Agreement, the term Business Day means any day which is not a Saturday
or Sunday on which The New York Stock Exchange, Inc. is open for
business. You may direct Clearing Broker to send confirmations to you
in care of your Prime Broker; the form of such directive may be obtained
from Clearing Broker and appended to this Agreement.
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7. CUSTOMER'S SETTLEMENT OBLIGATION
--------------------------------
In the event your Prime Broker indicates its intention not to
settle, or fails to settle, any of your Prime Brokerage Transactions,
you shall be responsible and liable to Clearing Broker for settling such
Prime Brokerage Transaction directly with Clearing Broker in a margin
account that Clearing Broker will open or has opened in your name on its
books in accordance with Regulation T of the Board of Governors of the
Federal Reserve System. Clearing Broker shall send you a new
confirmation of the replacement transaction(s).
8. DISCRETIONARY ACCOUNT
---------------------
(a) If your account is managed on a discretionary basis by an
investment adviser, money manager or other person ("adviser"), you
hereby acknowledge that your Prime Brokerage Transactions may be
commingled with those of other accounts of your adviser ("sub-
accounts"), according to your adviser's instructions, for clearance by
Clearing Broker in a single bulk trade and for settlement in bulk with
your Prime Broker. You further acknowledge that in the event your Prime
Broker indicates its intention not to settle or does not settle such
bulk trade because of one or more subaccounts receiving an allocation,
Clearing Broker will either cancel and rebill the bulk trade to reflect
the reduction of the securities which were originally allocated to the
objectionable sub-accounts or, if permissible, execute a corrected
allocation of the Prime Brokerage Transaction to sub-accounts in
accordance with your adviser's instructions. To facilitate such
allocation, Clearing Broker may open and carry an account in your name
on its books and you shall be solely responsible and liable to Clearing
Broker for selling such transaction directly with Clearing Broker. You
acknowledge that your adviser may resubmit the bulk trade and execute a
corrected allocation of the Prime Brokerage Transaction.
(b) If you are executing this Agreement on behalf of a
customer whose account is managed by you, you hereby represent and
covenant to Clearing Broker that: (i) each time you execute an order on
behalf of such customer, such customer is in compliance with the Minimum
Net Equity or you shall notify Clearing Broker otherwise; (ii) you shall
not enter an order for such customer in the event such customer falls
below the Minimum Net Equity; (iii) you will provide Clearing Broker
with the customer's name, address and Tax I.D. Number to enable Clearing
Broker to open and maintain an account for the benefit of such customer;
(iv) you have sufficient knowledge of such customer to make the
representation set forth in Paragraph 19 of this Agreement and; (v) you
have been duly authorized by the customer to execute this Agreement, to
bind such customer to arbitration, to enter orders to effect Prime
Brokerage Transactions, to execute a directive to Clearing Broker
regarding the mailing of confirmations, to disclose such financial
information as Clearing Broker deems necessary to effect such
transactions and to take such other actions as are contemplated by this
Agreement.
9. FEES AND CHARGES
----------------
You understand that Clearing Broker may charge commissions and
other fees for clearance or any other services furnished to you and you
hereby agree to pay such commissions and fees at the then prevailing
rates of Clearing Broker, as the case may be. You further understand
that service fees, if any, may be changed from time to time, upon 30
days prior written notice to you.
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10. RESTRICTIONS ON ACCOUNT
-----------------------
You understand that Clearing Broker, in its sole discretion, may
refuse to accept or execute Prime Brokerage Transactions on your behalf
or restrict or prohibit trading of securities in your account(s) with
Clearing Broker, or refuse to clear your securities transactions.
11. DEFAULT
-------
If; (i) you fail to perform your settlement obligations or in the
event your Prime Broker indicates its intention not to settle, or fails
to settle, any of your Prime Brokerage Transactions, as set forth in
paragraph 7 of this Agreement, (ii) any representation made by you shall
have been incorrect or untrue in any material respect when made, (iii)
you shall have admitted your inability to, or intention not to, perform
any of your obligations hereunder, (iv) you file a petition or other
proceeding in bankruptcy, insolvency, or for the appointment of a
receiver, or such a petition or proceeding is filed against you, (v) a
levy of an attachment is made against your account(s) with Clearing
Broker, (vi) you die or become mentally incompetent or you are a
corporation that dissolves, or (vii) you shall have otherwise breached
the terms of this Agreement (any one being an "Event of Default"),
Clearing Broker shall have the right to sell, without prior notice to
you, any and all property in which you have an interest held by or for
the benefit of Clearing Broker, to buy any property that may have been
sold short, to cancel any outstanding transactions and/or to purchase or
sell any other securities or other instruments to offset market risk,
and you shall be liable to Clearing Broker for all losses, costs and
expenses caused by such Event of Default, together with interest earned
thereon from the date of such Event of Default at the prime rate, until
payment in full is received by Clearing Broker.
12. LEGALLY BINDING
---------------
You hereby agree that this Agreement and all the terms hereof shall
be binding upon you and your estate, heirs, executors, administrators,
personal representatives, successors and assigns. You agree that all
Prime Brokerage Transactions shall be for your account(s) in accordance
with your oral or written instructions. You hereby waive any and all
defenses that any such instructions were not in writing as may be
required by the Statute of Frauds or any other similar law, rule or
regulation.
13. CLEARANCE ACCOUNTS
------------------
In the event your Prime Brokerage Transactions are executed by your
broker, who has introduced your account to Clearing Broker for clearance
services only, you agree that your broker and its employees are third
party beneficiaries of this Agreement, and that the terms and conditions
hereof, including, but not limited to, the Arbitration and Telephone
Conversations provisions, shall be applicable to all matters between or
among any of you, your broker and its employees, and Clearing Broker and
its employees.
14. MARGIN ACCOUNT, SECURITY INTEREST, CONSENT TO LOAN OR PLEDGE SECURITIES
-----------------------------------------------------------------------
(a) You hereby agree to deposit and maintain such margin in
your margin account as Clearing Broker may in its sole discretion
require, and you agree to pay immediately on demand any debit balance
therein. Upon your failure to pay, or at any time Clearing Broker deems
necessary for its protection, without prior demand, call or notice,
Clearing Broker shall be entitled to exercise all rights and remedies
provided herein. Unless you advise us to the contrary, you represent
4
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that you are not an affiliate (as defined in Rule 144(a) (1) under the
Securities Act of 1933) of the issuer of any security held in your
account.
(b) As security for the payment of your obligations to
Clearing Broker, Clearing Broker shall have a continuing security
interest in all property in which you have an interest held by or for
the benefit of Clearing Broker and may, without prior notice to-you,
use, apply or transfer any such property. In the event of a breach or
default under this Agreement Clearing Broker shall have-all rights and
remedies available to a secured creditor in addition; to the rights and
remedies provided herein.
(c) Within the limits of applicable law and regulations, you
hereby authorize Clearing Broker to lend either to itself or to others
any securities held by or for the benefit of Clearing Broker in your
account, together with all attendant rights of ownership, and to use all
such property as collateral for its general loans. Any such property;
together with all attendant rights of ownership, may be pledged,
repledged, hypothecated or rehypothecated either separately or in common
with other such property for any amounts due to Clearing Broker thereon
or for a greater sum, and Clearing Broker shall have no obligation to
retain a like amount of similar property in its possession and control.
(d) You hereby acknowledge receipt of Clearing Broker's
Truth-in-Lending disclosure statement. You understand that interest
will be charged on any debit balances in your account, in accordance
with the methods described in such statement or in any amendment or
revision thereto which may be provided to you. Any interest charged on
your debit balance which is not paid at the close of an interest period
will be added to the opening balance for the next interest period.
15. AMENDMENT; ENTIRE AGREEMENT
---------------------------
You agree that Clearing Broker may modify the terms of this
Agreement at any time upon prior written notice. If such modifications
are unacceptable to you, you must notify Clearing Broker in writing
within 30 days of Clearing Broker's transmittal of such notice. Your
account may then be terminated by Clearing Broker, after which you agree
to remain liable to Clearing Broker for all existing liabilities or
obligations. Otherwise this Agreement may not be waived or modified
absent a written instrument signed by an authorized representative of
Clearing Broker. Except as set forth above, this Agreement represents
the entire agreement and understanding between you and Clearing Broker
concerning the subject matter hereof.
16. TELEPHONE CONVERSATIONS
-----------------------
For the protection of both you and Clearing Broker, and as a tool
to correct misunderstandings, you hereby authorize Clearing Broker in
its discretion and without prior notice to you, to monitor and/or record
any or all telephone conversations between you, Clearing Broker and any
of Clearing Broker's employees or agents.
17. ASSIGNABILITY
-------------
This Agreement and the rights and obligations arising out of the
Prime Brokerage Transactions cleared pursuant hereto may not be assigned
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without the prior written consent of the other party, other than by
Clearing Broker as part of a general transfer of Clearing Broker's
business.
18. SEVERABILITY
------------
If any provision of this Agreement is or becomes inconsistent with
any applicable present or future law, rule or regulation, that provision
shall be deemed modified or, if necessary, rescinded in order to comply
with the relevant law, rule or regulation. All other provisions of this
Agreement shall continue to remain in full force and effect.
19. CAPACITY TO CONTRACT; CUSTOMER AFFILIATION
------------------------------------------
You represent that you are of legal age and that, unless you have
notified Clearing Broker to the contrary, neither you nor any member of
your immediate family is an employee of any exchange or member thereof,
an employee of the National Association of Securities Dealers, Inc. or a
member thereof, an employee of any corporation, firm or individual
engaged in the business of dealing, as broker or principal, in
securities, options or futures, or an employee of any bank, trust
company or insurance company.
20. EXTRAORDINARY EVENTS
--------------------
Clearing Broker shall not be liable for losses caused directly or
indirectly by government restrictions, exchange or market rulings,
suspension of trading, war, strikes or other conditions beyond its
control.
21. HEADINGS
--------
The headings of the provisions hereof are for descriptive purposes
only and shall not modify or qualify any of the rights or obligations
set forth in such provisions.
22. GOVERNING LAW
-------------
This Agreement shall be governed by the laws of NEW YORK STATE
without giving effect to the conflicts of law principles thereof.
23. DESIGNATION OF ADVISOR/AGENT
----------------------------
If your account is managed by an advisor, as such term is defined
in paragraph 8(a), or by an agent, and you are executing this Agreement,
you hereby authorize __________________ to engage in Prime Brokerage
Truncations on our behalf, and you hereby represent and covenant that
such advisor has been duly authorized by you to take such actions as are
contemplated by this Agreement.
24. ARBITRATION DISCLOSURES
-----------------------
* ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
* THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO JURY TRIAL.
* PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND
DIFFERENT FROM COURT PROCEEDINGS.
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* THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS
OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK
MODIFICATION OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
* THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF
ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES
INDUSTRY.
25. ARBITRATION
-----------
You agree, and by agreeing to maintain an account in the name of
your Prime Broker and designated for your benefit, Clearing Broker
agrees, that controversies arising between you and the Clearing Broker,
its control persons, predecessors, subsidiaries and affiliates and all
respective successors, assigns and employees, whether arising prior to,
on or subsequent to the date hereof, shall be determined by arbitration.
Any arbitration under this Agreement shall be conducted pursuant to the
Federal Arbitration Act and the laws of the state designated in Paragraph
22, held at the facilities and before an arbitration panel appointed by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc., or
an arbitration facility provided by any other exchange of which the Clearing
Broker is a member, the National Association of Securities Dealers, Inc.,
or the Municipal Securities Rulemaking Board, and in accordance with the
rules then in effect of the selected organization. You may elect one of
the foregoing forums for arbitration, but if you fail to make such election
by registered mail or telegram addressed to the Clearing Broker (or any
other address of which you are advised in writing), before the expiration
of ten days after receipt of a written request from the Clearing Broker to
make such election, then the Clearing Broker may make such election. For
any arbitration solely between you and a broker for which the Clearing
Broker acts as clearing agent, such election shall be made by registered
mail to such broker at its principal place of business. The award of
the arbitrators, or of the majority of them, shall be final, and
judgment upon the award rendered may be entered in any court, state or
federal, having jurisdiction.
No person shall bring a putative or certified class action to
arbitration, nor seek to enforce any pre-dispute arbitration agreement
against any person who has initiated in court a putative class action or
who is a member of a putative class who has not opted out of the class
with respect to any claims encompassed by the putative class action
until:
(i) the class certification is denied;
(ii) the class is decertified; or
(iii) the customer is excluded from the class by the court.
Such forbearance to enforce an agreement to arbitrate shall
not constitute a waiver of any rights under this Agreement
except to the extent stated herein.
By signing this Agreement you acknowledge that:
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1. The securities in your margin account(s) and any securities for
which you have not fully paid, together with all attendant ownership
rights, may be loaned to Clearing Broker or loaned out to others; and
2. You have received a copy of this Agreement.
This Agreement contains a pre-dispute arbitration clause at paragraph 25.
This Agreement is dated as of May 1, 1998.
/s/ Michael B. Orkin
___________________________________________
(Signature)
Michael B. Orkin, President
____________________________________________
(Typed or Printed Name & Title)
____________________________________________
3340 Peachtree Road
- --------------------------------------------
2050 Tower Place
- --------------------------------------------
Atlanta, GA, 30326
- --------------------------------------------
(Full Mailing Address)
Accepted by:________________________________
Clearing Broker
Date:_______________________________________
Account No.:________________________________
Social Security # Or Tax ID:________________
8
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SCHEDULE
List of managed accounts covered by agreement for Prim Brokerage
Clearance Services
________________________________________________________________________________
CUSTOMER NAME ADDRESS TAX ID NO.
________________________________________________________________________________
C&O Investment Partners LP- _______________________ 58-2073757
PaineWebber
________________________________________________________________________________
C&O Market Opportunity - _______________________ 58-2043250
PaineWebber
________________________________________________________________________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
____________________________ _______________________ ______________________
9
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APPENDIX
INSTRUCTIONS TO EXECUTING SELF-CLEARING BROKER OR CLEARING
AGENT OF EXECUTING BROKER REGARDING THE MAILING OF CONFIRMATIONS
The undersigned customer has entered into an Agreement For Prime
Brokerage Clearance Services (the "Agreement") with Clearing Broker
("CB") which provides, among other things, that CB shall issue a
confirmation for each transaction it executes or clears on behalf of the
undersigned, unless the undersigned directs CB, in writing, to send
confirmations to the undersigned in care of the undersigned's prime
broker.
The undersigned hereby requests that CB, as executing broker or as
clearing agent for an executing broker, to send confirmations to the
undersigned in care of the undersigned's prime broker. This instrument
shall not be deemed to either incorporated in or made a part of the
Agreement.
The undersigned acknowledges that it its accounts managed on a
discretionary basis by an investment advisor or money manager, each
confirmation may cover a single bulk trade representing truncations that
have been commingled with those of other accounts of the undersigned's
advisor.
By accepting these instructions, CB hereby acknowledges that this
instrument is not a condition for entering into the Agreement of the
prime brokerage arrangement. CB further agrees that it shall not charge
differential fees based on whether an instruction such as this is
provided nor shall CB otherwise create incentives for the undersigned to
execute this instrument.
____________________________________
(Typed or Printed Name & Title)
____________________________________ Account No.:__________________________
(Signature)
____________________________________ Social Security # Or Tax ID:__________
(Typed or Printed Name & Title)
____________________________________
(Signature)
10
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the references to our firm in the Post-Effective
Amendment No. 13 to the Registration Statement on Form N-1A of
The Caldwell & Orkin Funds, Inc. and to the use of our report
dated May 27, 1999 on the financial statements and financial
highlights of the Caldwell & Orkin Market Opportunity Fund series
of The Caldwell & Orkin Funds, Inc. Such financial statements and
financial highlights appear in the 1999 Annual Report to Shareholders
which is incorporated by reference into the Statement of Additional
Information.
/s/ Tait, Weller & Baker
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
June 29, 1999
