<PAGE> 1
[CALDWELL & ORKIN(TM) LOGO]
INVESTMENT ADVISER MARKET OPPORTUNITY FUND SHAREHOLDER ACCOUNTS
C&O Funds Advisor, Inc. c/o Integrated Fund Services, Inc.
Suite 150 P.O. Box 5354
6200 The Corners Parkway Cincinnati, Ohio 45201-5354
Norcross, Georgia 30092 (800) 467-7903
(800) 237-7073
A member of Caldwell & Orkin, Inc.
SEMI-ANNUAL REPORT TO SHAREHOLDERS
DEAR FELLOW SHAREHOLDER: DECEMBER 28, 2000
The Caldwell & Orkin Market Opportunity Fund (the "Fund") rose 7.82% in the
6-month period ended October 31, 2000. Since its commencement of active
management on August 24, 1992 through October 31, 2000, the Fund has generated a
17.02% compounded annual return, an achievement made without a heavy reliance on
the upward movement of the stock market, as evidenced by the Fund's low market
risk profile (see pages 6, 7 and 8).
During the period of active management, the Fund's price movements have
experienced virtually no correlation (0.00%) to the price movements of the S&P
500 with Income index, indicating that the Fund's performance is not
attributable to the performance of the index. The Fund's beta (a measure of
volatility) is also 0.00. An S&P 500 index fund has a 100% correlation with the
market and a beta of 1.00. In essence, the Fund has been generating its
performance under its own power, and not by riding the market's wave. Of
additional interest, the semi-variance (a measure of downside volatility) of the
S&P during this period was 13.91. The Fund's semi-variance was just 7.91,
indicating that the Fund's downward price movements were significantly less
volatile than those of the index (statistical computations by Ned Davis
Research, Inc.).
The Market Opportunity Fund's investment objective is to provide long-term
capital growth with a short-term focus on capital preservation through asset
allocation and investment selection. When a stock is purchased, two principal
types of risk are assumed, market risk and stock risk. Market risk is the risk
that the broad market declines, taking good companies down with it. Stock risk
is the risk that a stock underperforms due to company-specific reasons.
The Fund uses active asset allocation - the opportunistic shifting of assets
between long stock positions, short stock positions (selling borrowed stock and
then attempting to purchase it at a lower price), high quality bonds and cash
equivalents - to manage exposure to market risk. Short positions are taken with
the intent of making money when stock prices fall. A disciplined investment
selection process, with a heavy emphasis on research and incorporating both
fundamental and technical analysis, is used to manage stock risk.
The Fund's market exposure can range from 100% net long to 60% net short.
Historically, the asset allocation has not approached those extremes, and it is
unlikely that we would be postured either fully net long or net short. The
Equity Investment Position chart on page 5 provides a graphical representation
of the Fund's historical asset allocation. A risk of this type of investment
approach is that the Fund may lag a rising stock market while a hedged position
is maintained. In summary, our goal is to make money over a full market cycle,
but with less stomach churn.
1
<PAGE> 2
SIX MONTHS IN REVIEW
The U.S. economy has downshifted from a blazing 7.3% annualized rate of growth
in Q4 1999 to a 2.2% clip in Q3 2000, and is estimated to slow further still to
2.0% in Q4 2000. The Market Opportunity Fund has been well positioned for the
slowdown. The strong economy has been fueled in large part by the surging stock
market and the resultant wealth effect, which sparked voracious consumer demand.
But the economy's strength may have been its greatest weakness. To fully
appreciate the last six months' performance, we need to add a little historical
perspective.
Jason Trennert of the International Strategy & Investment Group, Inc. (ISI),
pointed out in a recent research piece that, "In each of the last three years,
the emergence of a financial crisis (Asia in 1997, Long-Term Capital Management
in 1998, and Y2K in 1999) and their attendant impact on central bank policy
wound up being great for financial assets," because they resulted in aggressive
Federal Reserve easing. The Fed's monetary policy is an important factor in our
work since it is a major determinant of liquidity pressure and can cause higher
and lower stock prices. A policy of tightening (raising interest rates)
constricts liquidity flows, while loosening or easing has the opposite effect.
Generally speaking, less liquidity is a negative for financial assets and tends
to put downward pressure on prices, whereas greater liquidity exerts upward
pressure on prices.
After Asia and Long-Term Capital, accommodative monetary policies worldwide set
the stage for strong U.S. and global economic growth. Eventually, the Fed became
concerned, and in June, 1999, it reversed course and initiated a series of
monetary policy tightening actions in an effort to slow the economy. The Fed's
primary concern was wage inflation. Wages account for roughly two-thirds of a
manufactured good's price, and with the unemployment rate hovering in the record
low 3.9% to 4.1% range, and with a very thin "float" of workers available, the
demand for labor resulting from a growing economy could outstrip supply.
Employers would have to pay more to attract qualified employees, and passing
those higher costs along to consumers would be inflationary. (The Fed's primary
concern is price stability.)
But the economy's growth rate accelerated. Wage pressures were kept at bay
thanks in part to productivity gains made by the existing workforce due to
investments in technology, which offset the need for additional workers. And, a
flood of cheap imports helped keep prices of domestic manufactured goods in
check. Furthermore, the rising stock market was harnessed to pay extraordinary
compensation through the use of options (options are not included in "wages,"
and thus excluded from inflation numbers). Nonetheless, the Fed continued its
tightening assault, and we positioned the portfolio with a bearish bias. On
October 27, 1999, the Fund's exposure was 31.7% net short, with much of that
short exposure in internet stocks. Our rationale was that any liquidity crunch
resulting from the tightenings would hit hardest those stocks that were
overvalued the most and lacked realistic business models. We were at the right
party, but on the wrong day.
Then the third "financial crisis" hit. While the Fed had been talking tough
about fighting inflation and tightening monetary policy during late 1999, it had
also been printing money in preparation for a potential Y2K computer-related
run on banks. Thus, the Fed was actually loosening while tightening, and the net
effect was to pump more liquidity into the financial system. A large portion of
that liquidity went into the stock market, putting upward pressure on asset
prices, primarily technology and internet shares, which were being hawked by
Wall Street "analysts" at the time.
Although we had a lot of conviction in the internet shorts, we chose not to
fight the Fed, and we got out of the way. In the last two days of October, 1999
the Fund went from 31.7% net short to 15% net short, and by the end of November,
1999, the Fund's exposure was 6.1% net long.
With the Y2K-induced easing out of the way, we repositioned the portfolio
during Q1 2000 for a tightening monetary climate, and as it turned out, a very
volatile market environment.
2
<PAGE> 3
Against that backdrop, the Market Opportunity Fund opened the review period on
May 1, 2000 positioned 35.42% long, 53.66% short and 10.92% in cash, effectively
18.24% net short. Almost 19% of the portfolio's net assets were allocated to
short positions in various internet-related industries, with another 11.5% short
financial services issues, primarily sub-prime lenders. The largest long
industry concentration was in the oil & gas area - drillers as well as
production and pipeline companies - which accounted for 9.5% of the portfolio.
Throughout the six-month period the market has acted spasmodically, with
investors scurrying in and out of the market on the release of just about any
report mentioning the economy or inflation. Three global themes were making
headlines and negatively affecting the markets: the technology sector was in
trouble, monetary policy was tightening as credit quality was waning, and energy
costs were skyrocketing. In September, ISI Group's Ed Hyman pulled the three
themes together, opining that the economy was sailing in to "The Perfect Storm"
- the global convergence of the three storm fronts - and that a recession
(generally, two back-to-back quarters of negative economic growth) could result.
Hyman puts the odds of a mild recession at 30%, and the odds of a severe
recession at 10%.
Our portfolio actions during the period have allowed us safe passage (thus far)
through the "storm." With a slowing economy and a tightening credit market, we
are even more convinced that certain technology companies in general, and
E-commerce internet companies in particular, are vulnerable. The NASDAQ
Composite peaked March 10, and took a 37.32% tumble over the following 52 days,
sprinkling a dose of reality over the net sector. With cracks appearing on the
information superhighway, ISI Group in May began a problem.com list of internet
concerns reporting difficulties. As of December 26th, that list had 670 entries.
And, coming on the heels of a bleak holiday sales season, we expect additional
casualty reports to surface in early 2001.
Many of the troubled E-commerce firms employed a business-to-consumer business
model (B2C), plying books, toys, groceries, pet food, etc. online. Some
"reinvented" themselves (out of necessity) as business-to-business (B2B) when
the B2C concept didn't pan out. Whether a company is B2B or A2Z, one thing is
certain: the internet has changed everyday life, and will continue to do so in
ways we cannot even imagine today. Some companies will thrive, but many, if not
most, will fail (generally, those internet companies that went public in the
twentieth century). Through the end of August we maintained a significant short
exposure to internet stocks. That exposure lessened somewhat in September as
stock values retreated. As of October 31, 2000, internet-related shorts
accounted for 9.57% of the Fund's portfolio. As our internet shorts have hit pay
dirt, many have been covered in the $3 to $5 per share range, and those proceeds
have been re-deployed to investment ideas with greater potential reward.
On the financial storm front, ISI counts 153 separate central bank tightenings
globally over the last 18 months. Since it usually takes 12 months for interest
rate movements to impact an economy, today's U.S. economic climate reflects a
Fed Funds rate of 5.5%, a full point lower than where it is today. Thus, if the
rate increases were to stop now, the low spot in global growth may not be
reached for another year. To that end, the Fed at it's December 19th meeting
moved from a tightening bias to an easing bias (jumping over a neutral bias),
left the Federal Funds rate intact at 6.5%, and acknowledged that the balance of
risks favor economic weakness. Globally, there have been six central bank
easings in December, and the European Central Bank has an easing bias.
While central banks have been tightening, commercial banks are also imposing
tighter lending standards due to regulatory scrutiny, squeezed bank profit
margins and a general decline in credit quality. Corporate credit quality is a
serious issue. Standard & Poor's forecasts record corporate bond defaults in
2000, and Moody's predicts 8.4% of the junk bond debt outstanding will default.
Bank losses from syndicated loans have more than tripled, and a third of such
loans are considered junk quality. Banks' loan loss reserves have fallen to 1.6%
of total loans outstanding (the lowest level since 1987), problem loans are up
45% from last year, and loans classified as
3
<PAGE> 4
uncollectible have increased 300%. Personal debt and margin debt are close to
record levels, and household debt as a percent of GDP has been on a steady climb
(see page 5).
As stated earlier, the Fed's monetary policy is an important factor in our work,
and in the macro sense many of our overall investment decisions are influenced
by monetary policy. On the micro level, troubles we see in the financial sectors
as well as the generally over-extended state of the average consumer have guided
our sector and individual themes. Those companies we've targeted on the short
side include sub-prime lenders, credit card issuers, and tangentially, mobile
home manufacturers.
Finally, the rapid rise in commodity oil and gas prices and regional power
shortages have presented us with many long opportunities in these sectors.
Drillers are in demand, and electric utilities are one of the few industries
that have pricing power in the current economic climate. Others with pricing
power where we have exposure include insurance and healthcare providers.
With this general lack of pricing power, combined with the deteriorating
earnings environment, we have found the list of quality potential long
candidates to be somewhat shorter than usual. There are plenty of names we like
on the short side, but we've been cautious not to guide the portfolio to an
overly-bearish net short positioning, especially as we near the
seasonally-strong late December through January time period. As a result, we
have carried a higher-than usual cash position.
OUTLOOK
The Fed failed to throw a life preserver to Wall Street at its December meeting,
and the market reacted by sinking a little deeper. The Fed did, however, switch
its bias and signal that a loosening move may be made in the future. To a
company trying to grow and needing capital now, however, the financing and debt
markets are still very tight, and the Fed's bias shift was of no help. The
current interest rate environment, especially in the junk-bond market, is
hitting corporate earnings hard, and it's also making life that much more
difficult for the over-leveraged consumer.
The Fed will probably begin easing in January. But given the lag time before any
move is felt in the economy, the economy will probably continue to slow well
into 2001. ISI Group is looking for 2%, 1% and 1% GDP growth in Q1, Q2 and Q3
2001, respectively. Strong earnings will be hard to come by. What will the stock
market do? That's the $64,000 question. Stay tuned.
IN CONCLUSION
This has been a good year for shareholders of the Caldwell & Orkin Market
Opportunity Fund. Through December 27, 2000, the Fund has appreciated
year-to-date 26.26%, compared to a loss of -8.56% for the S&P 500 with Income.
While we are certainly pleased with these results, especially given the
market-risk sensitive nature of our investment style, we take even greater pride
in the Fund's long-term performance record (see page X), because we're not
managing the Fund for a quarter or a year, but rather for a full market cycle.
Every day brings new challenges and opportunities. To that end, we will continue
managing the Fund's portfolio for risk as we perceive it, as well as return. On
behalf of my team and myself, we appreciate your investment in the Caldwell &
Orkin Market Opportunity Fund, and we thank you for your continued support.
Sincerely,
Michael B. Orkin, CFA
Portfolio Manager and Chief Investment Officer
4
<PAGE> 5
Daily Data 8/25/1992 - 12/21/2000
CALDWELL & ORKIN MARKET OPPORTUNITY MUTUAL FUND
EQUITY INVESTMENT POSITION
READING ABOVE ZERO INDICATES PERCENT LONG POSITION;
BELOW ZERO FOR PERCENT SHORT POSITION
CHART
Household Debt as a % of GDP Quarterly Data 3/31/1952 - 9/30/2000
CHART
Charts Courtesy of Ned Davis Research, Inc.
5
<PAGE> 6
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
STATISTICAL RISK PROFILE 8/31/1992 - 10/31/2000
TEN WORST S&P 500 WITH INCOME DAYS
The Caldwell & Orkin
Market Opportunity Fund
outperformed the S&P
500 with Income on all ten
of the ten worst days, and
was positive on seven of
the ten days.
<TABLE>
<CAPTION>
Date C&O MOF S&P 500 Variance
---- ------- ------- --------
<S> <C> <C> <C>
10/27/97 -1.60% -6.86% 5.26%
08/31/98 0.42 -6.77 7.19
04/14/00 1.81 -5.77 7.58
01/04/00 0.27 -3.83 4.10
08/27/98 -0.19 -3.83 3.64
08/04/98 0.10 -3.62 3.72
03/08/96 -1.30 -3.07 1.77
09/30/98 0.55 -3.04 3.59
02/18/00 0.16 -3.03 3.19
10/01/98 0.82 -3.00 3.82
</TABLE>
TEN WORST S&P 500 WITH INCOME WEEKS
The Caldwell & Orkin
Market Opportunity Fund
outperformed the S&P
500 with Income in all ten
of the ten worst weeks,
and was positive eight of
the ten weeks.
<TABLE>
<CAPTION>
Week Ending C&O MOF S&P 500 Variance
----------- ------- ------- --------
<S> <C> <C> <C>
04/14/00 4.51% -10.52% 15.03%
10/15/99 2.86 -6.61 9.47
01/28/00 0.27 -5.61 5.88
09/04/98 0.33 -5.15 5.48
08/28/98 0.65 -4.98 5.63
01/09/98 -0.11 -4.83 4.72
07/23/99 0.01 -4.34 4.35
09/24/99 -0.83 -4.32 3.49
07/28/2000 1.99 -4.05 6.04
10/02/98 1.80 -4.00 5.80
</TABLE>
TEN WORST S&P 500 WITH INCOME MONTHS
The Caldwell & Orkin
Market Opportunity Fund
outperformed the S&P
500 with Income in all ten
of the ten worst months,
and was positive seven of
the ten months.
<TABLE>
<CAPTION>
Month C&O MOF S&P 500 Variance
----- ------- ------- --------
<S> <C> <C> <C>
August 1998 3.12% -14.46% 17.58%
August 1997 4.00 -5.61 9.61
September 2000 2.45 -5.26 7.71
January 2000 0.11 -5.00 5.11
July 1996 -0.82 -4.40 3.58
March 1994 -4.10 -4.35 0.25
March 1997 4.50 -4.10 8.60
November 1994 0.27 -3.72 3.99
October 1997 4.21 -3.31 7.52
February 1999 -1.11 -3.12 2.01
</TABLE>
<TABLE>
<CAPTION>
C&O MOF S&P 500
------- -------
<S> <C> <C>
Correlation Coefficient 0.00% 100.0%
Beta 0.00 1.00
Semi-Variance 7.91 13.91
Sharpe Ratio 1.11
</TABLE>
PERFORMANCE DURING THE LAST THREE MARKET DOWNTURNS OF 10% OR MORE
<TABLE>
<CAPTION>
C&O MOF S&P 500
------- -------
<S> <C> <C>
March 24, 2000 through April 14, 2000 5.91% -11.13%
July 16, 1999 through October 15, 1999 -0.45 -11.78
July 17, 1998 through August 31, 1998 4.02 -19.17
</TABLE>
Short selling began May 2, 1994. Past performance is no guarantee
of future results.
Computations by Ned Davis Research, Inc.
6
<PAGE> 7
CALDWELL & ORKIN MARKET OPPORTUNITY FUND
TOTAL RETURN PERFORMANCE SUMMARY THROUGH OCTOBER 31, 2000(1)
<TABLE>
<CAPTION>
C&O MARKET S&P 500
FISCAL OPPORTUNITY WITH INCOME
YEAR ENDED FUND INDEX(2)
---------- ----------- ----------
<S> <C> <C>
1991 1.25% 0.57%
1992 (3) 11.96% 14.07%
1993 * 15.09% 9.23%
1993 ** 21.09% 9.28%
1994 16.48% 5.30%
1995 (2.28)% 17.40%
1996 31.80% 30.18%
1997 23.24% 25.11%
1998 25.77% 41.02%
1999 19.43% 21.80%
2000 (0.02)% 10.09%
Six months ended 10/31/2000 7.82% (1.02)%
Twelve months ended 10/31/2000 14.81% 6.05%
Since (08/24/92)(4) 262.53% 311.78%
Since Inception (03/11/91) 290.58% 372.16%
<CAPTION>
AVERAGE ANNUAL RETURN
<S> <C> <C>
One Year 14.81% 6.05%
Three Years 10.98% 17.58%
Five Years 19.97% 21.64%
Since 08/44/92 (4) 17.02% 18.85%
Since Inception (03/11/91) 15.15% 17.43%
</TABLE>
NET ASSET ALLOCATION
APRIL 30, 2000
[PIE CHART]
Short-term investments and Other Net Assets 10.92%
Common Stock Owned 35.42%
Common Stock Sold Short 53.66%
OCTOBER 31, 2000
[PIE CHART]
Short-term investments and Other Net Assets 24.32%
Common Stock Owned 38.77%
U.S. Treasury Bonds 5.13%
Common Stock Sold Short 31.78%
Common Stock Sold Short represents the market value, excluding margin
requirements.
--------------
(1) Performance figures represent past performance and do not indicate
future results. The investment return and principal value will
fluctuate so that upon redemption you may receive more or less than
your original investment.
(2) The S&P 500 with Income index ("S&P 500") is a widely recognized
unmanaged index of U.S. Stocks. The S&P 500 figures do not reflect any
fees or expenses, nor do they reflect the use of short positions. There
is no unmanaged index currently available which reflects the use of
both long and short positions. We cannot predict the Fund's future
performance, but we expect that our investment strategy, which includes
the use of short sales, will cause the Fund's performance to fluctuate
independently from the S&P 500. While the portfolio is hedged, our
strategy may prevent the Fund from participating in market advances,
yet it may offer the Fund downside protection during market declines.
(3) Total return for the fiscal year ended April 30, 1992 has been restated
to 11.96% from the previously reported 11.86% due to mathematical
rounding.
(4) Effective August 24, 1992, the Caldwell & Orkin Market Opportunity Fund
changed its investment objectives to provide long-term capital growth
with a short-term focus on capital preservation through investment
selection and asset allocation. A prior fund passively managed and
indexed to the largest 100 over-the-counter (OTC) stocks began
operations on March 11, 1991.
* For the full fiscal year ending April 30, 1993.
** From August 24, 1992 through April 30, 1993 - the portion of the year
using the Caldwell & Orkin Multifactor style of investment management.
The total return for the Caldwell & Orkin Market Opportunity Fund for
this period has been restated to 21.09% from the previously reported
19.16% to accurately reflect the inception NAV when active management
of the Fund began.
7
<PAGE> 8
CALDWELL & ORKIN MARKET OPPORTUNITY FUND VERSUS S&P 500 WITH INCOME INDEX
Results of a Hypothetical $10,000 Investment
Combined Old and Active Style of Investment Management
March 11, 1991 through October 31, 2000
[CHART]
CALDWELL & ORKIN MARKET OPPORTUNITY FUND VERSUS S&P 500 WITH INCOME INDEX
Results of a Hypothetical $10,000 Investment
Since Commencement of Active Style of Investment Management
August 24, 1992 through October 31, 2000
[CHART]
Past performance is no guarantee of future results.
8
<PAGE> 9
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
------- ------------
<S> <C> <C> <C>
COMMON STOCK (LONG POSITIONS) 38.77%
-----
AEROSPACE / DEFENSE 2.33%
LITTON INDUSTRIES INC * 24,200 $1,256,888
LOCKHEED MARTIN CORP. 118,700 4,255,395
BANKS - MONEY CENTER 1.02%
CITIGROUP INC. 46,000 2,420,750
COMPUTER - SERVICES 0.85%
IMS HEALTH, INC. 85,300 2,015,213
ELEC - SEMICONDUCTOR MFG 1.38%
CYPRESS SEMICONDUCTOR * 39,700 1,486,269
XILINX INC. * 24,500 1,774,719
FINANCE - INVESTMENT MGMT 2.57%
BERKSHIRE HATHAWAY INC-B * 2,900 6,098,700
FINANCIAL SERVICES - MISC 0.83%
JOHN HANCOCK FINANCIAL 61,900 1,957,588
INSURANCE - LIFE 1.33%
LINCOLN NATIONAL CORP 65,200 3,154,050
INSURANCE - PROP / CAS / TITL 4.28%
AMERICAN INT'L GROUP 25,800 2,528,400
CHUBB CORP. 18,100 1,528,319
THE ALLSTATE CORPORATION 55,900 2,249,975
XL CAPITAL LTD CL A 50,000 3,843,750
INTERNET - E COMMERCE 0.52%
EBAY, INC. * 23,700 1,222,304
MEDICAL - ETHICAL DRUGS 1.62%
KING PHARMACEUTICALS, INC * 85,900 3,849,394
MEDICAL - GENERIC DRUGS 0.65%
KV PHARMACEUTICAL - CL. A * 39,450 1,536,084
MEDICAL - HOSPITALS 5.12%
COMMUNITY HEALTH SERVICES * 120,600 3,399,413
PROVINCE HEALTHCARE CO. * 27,600 1,162,650
TENET HEALTHCARE CORP. * 65,400 2,571,038
THE HEALTHCARE COMPANY 64,100 2,559,994
UNIVERSAL HEALTH SVCS - B * 29,200 $2,449,150
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 10
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
------- ------------
<S> <C> <C> <C>
MEDICAL - PRODUCTS 0.86%
SEPRACOR INC * 29,900 $ 2,036,938
OIL & GAS - DRILLING 2.81%
ENSCO INTERNATIONAL 48,000 1,596,000
GLOBAL MARINE INC. * 85,900 2,276,350
MARINE DRILLING CO. INC. * 65,200 1,556,650
PRIDE INTERNATIONAL * 48,300 1,222,594
OIL & GAS - FIELD SERVICES 1.17%
BJ SERVICES CO. * 34,200 1,793,363
TIDEWATER, INC. 20,900 965,319
OIL & GAS - PROD / PIPELINE 1.22%
DYNEGY INC 25,400 1,176,338
EL PASO ENERGY CORP. 27,300 1,711,369
POLLUTION CONTROL - SVCS 2.45%
WASTE MANAGEMENT INC. 290,100 5,802,000
RETAIL - SUPER / MINI MKTS 2.04%
PATHMARK STORES INC. * 188,500 2,957,093
SAFEWAY,INC. * 34,400 1,881,250
RETAIL / WHLSLE - CMPTR / CELL 0.56%
RADIO SHACK CORP 22,100 1,317,712
TELECOMMUNICATIONS - SVCS 1.53%
BELLSOUTH CORP 75,900 3,666,918
TOBACCO 1.26%
PHILIP MORRIS COS., INC. 81,700 2,992,262
TRANSPORTATION - SHIP 0.15%
OMI CORPORATION * 50,000 346,874
UTILITY - ELECTRIC POWER 1.67%
DPL, INC. 79,300 2,250,137
DUKE POWER CO 19,700 1,702,818
UTILITY - GAS DISTRIBUTION 0.55%
KINDER MORGAN, INC. 33,500 1,291,843
TOTAL COMMON STOCKS HELD LONG 38.77% $91,863,871
------
(COST $81,613,817)(caret)
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 11
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
---------- ------------
<S> <C> <C> <C>
U.S. TREASURY BONDS 5.13%
-----
U.S. TREASURY BOND 5/15/16 7.25% 10,798,000 $ 12,150,806
(COST $12,205,189)
</TABLE>
<TABLE>
<S> <C>
TOTAL INVESTMENT IN SECURITIES (COST $93,819,006): 43.90%.................. 104,014,677
OTHER ASSETS LESS LIABILITIES: 56.10%...................................... 132,937,018
------------
TOTAL NET ASSETS 100.00%.................................................. $236,951,695
============
</TABLE>
* Non-income producing security
(caret) At October 31, 2000, the cost of securities for federal tax purposes
was the same as their cost for financial reporting purposes. Unrealized
appreciation and depreciation were as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $10,237,153
Gross unrealized depreciation (856,952)
-----------
Net unrealized appreciation $ 9,380,201
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 12
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
-------- ------------
<S> <C> <C> <C>
COMMON STOCK (SHORT POSITIONS) -31.78%
-------
BANKS - MONEY CENTER -0.73%
BANK OF AMERICA CORP (36,000) $(1,730,250)
BANKS - NORTHEAST -0.67%
PEOPLE'S BANK BRIDGEPORT (78,300) (1,585,575)
BANKS - SUPER REGIONAL -2.92%
BANK ONE CORP (128,000) (4,672,000)
SUNTRUST BANKS INC (46,200) (2,255,138)
BLDG - MOBILE / MFG & RV -2.12%
CLAYTON HOMES, INC (274,200) (2,519,213)
FLEETWOOD ENTERPRISES (191,300) (2,522,769)
CHEMICALS - BASIC -0.41%
ROHM & HAAS COMPANY (32,400) (974,025)
COMPUTER SOFTWR - ENTERPSE -0.40%
RATIONAL SOFTWARE CORP (15,800) (943,063)
DIVERSIFIED OPERATIONS -0.49%
AGILENT TECHNOLOGIES INC (24,900) (1,153,181)
ELEC - MISC COMPONENTS -0.38%
RF MICRO DEVICES, INC (44,800) (893,200)
ELEC - SEMICONDUCTOR EQUIP -0.50%
NOVELLUS SYSTEMS INC (28,900) (1,183,094)
ELEC - SEMICONDUCTOR MFG -3.34%
ADVANCED MICRO DEVICES (116,800) (2,642,600)
CREE, INC (32,600) (3,235,550)
MICRON TECHNOLOGY, INC (17,100) (594,225)
QLOGIC CORPORATION (8,900) (861,075)
RAMBUS INC (12,600) (566,213)
FINANCE - CONSUMER/CML LNS -0.52%
HOUSEHOLD INTERNATIONAL (24,300) (1,222,594)
FINANCE - INVESTMENT BKRS -0.76%
MORGAN STANLEY DEAN WITTE (16,300) (1,309,094)
TD WATERHOUSE GROUP, INC (29,900) $ (495,219)
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE> 13
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
-------- ------------
<S> <C> <C> <C>
FINANCE - INVESTMENT MGMT -0.50%
FRANKLIN RESOURCES, INC (27,600) (1,182,384)
FINANCE - SAVINGS & LOAN -1.78%
GREENPOINT FINANCIAL CORP (141,900) (4,221,525)
FINANCIAL SERVICES - MISC -1.18%
MBNA CORPORATION (74,700) (2,805,919)
INSURANCE - LIFE -0.32%
CONSECO INC (107,900) (748,556)
INTERNET - E COMMERCE -5.59%
AMAZON.COM INC (155,400) (5,691,525)
DOUBLECLICK, INC (90,000) (1,462,500)
ETOYS INC (99,700) (373,875)
E*TRADE GROUP, INC (93,900) (1,367,419)
INTERNET CAPITAL GROUP (144,500) (1,914,625)
NETCENTIVES INC (25,400) (180,975)
NET.B@NK INC (79,300) (688,919)
S1 CORPORATION (25,300) (305,181)
SPORTSLINE USA INC (53,100) (454,669)
STAMPS.COM, INC (111,800) (440,213)
VENTRO CORP (67,300) (323,881)
INTERNET - ISP / CONTENT -1.50%
24/7 MEDIA, INC (123,000) (638,063)
CHINADOTCOM CORPORATION (108,800) (1,101,600)
JUNO ONLINE SERVICES, INC (71,300) (189,391)
STARMEDIA NETWORK, INC (130,400) (798,700)
STYLECLICK.COM INC (39,600) (282,150)
YAHOO (9,300) (545,213)
INTERNET - NTWK SEC / SLTNS -0.58%
CISCO SYSTEMS, INC (12,900) (694,988)
MARCHFIRST INC (76,900) (446,980)
SCIENT CORP (13,000) (234,000)
INTERNET - SOFTWARE -1.92%
CMGI (55,900) (943,312)
F5 NETWORKS, INC (49,800) (1,543,800)
SAFEGUARD SCIENTIFICS,INC (49,700) (764,137)
WEBMD CORPORATION (114,300) (1,300,162)
LEISURE - GAMING -0.37%
MGM MIRAGE (26,400) $ (912,450)
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE> 14
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
-------- ------------
<S> <C> <C> <C>
LEISURE - SERVICES -0.90%
CARNIVAL CORP - CL A (45,200) $(1,121,524)
ROYAL CARIBBEAN CRUISES (44,900) (1,010,250)
MEDICAL - BIOMED / GENETICS -2.03%
AMGEN, INC (7,600) (440,324)
IMMUNEX CORP (102,200) (4,349,887)
OFFICE - EQUIP & AUTOMATN -0.49%
COINSTAR INC (88,000) (1,160,500)
RETAIL - DEPARTMENT STORES -0.85%
DILLARD'S INC (123,400) (1,295,700)
SAKS INCORPORATED (75,000) (764,062)
RETAIL - MAJOR DISC CHAINS -0.53%
DOLLAR GENERAL (81,100) (1,257,050)
TOTAL SECURITIES SOLD SHORT -31.78% $(75,314,487)
------
(PROCEEDS $94,547,378)
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 15
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
STATEMENT OF ASSETS & LIABILITIES
October 31, 2000
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $93,819,006) $ 104,014,677
Segregated cash with brokers and other financial institutions 114,451,556
Deposits with brokers for securities sold short 126,045,906
Receivables:
Investment securities sold 2,806,328
Interest and dividends 1,233,801
Capital shares sold 108,890
Other 29,573
--------------
TOTAL ASSETS 348,690,731
--------------
LIABILITIES:
Securities sold short, not yet purchased (proceeds $94,547,378) 75,314,487
Payables:
Investment securities purchased 35,767,648
Capital shares redeemed 286,536
Investment advisory fee 156,865
Other 119,945
Accrued expenses 93,555
--------------
TOTAL LIABILITIES 111,739,036
--------------
TOTAL NET ASSETS $ 236,951,695
==============
NET ASSETS CONSIST OF:
Undistributed net investment income 8,898,193
Accumulated net realized (loss) (11,969,692)
Net unrealized appreciation on investments 29,428,562
Paid-in capital applicable to 11,229,709 shares
outstanding; par value $0.10 per share;
30,000,000 shares authorized 210,594,632
--------------
236,951,695
==============
NET ASSET VALUE AND OFFERING/REDEMPTION
PRICE PER SHARE $ 21.10
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 16
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
STATEMENT OF OPERATIONS
For the Six Months Ended October 31, 2000
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 283,132
Dividends 6,849,662
--------------
TOTAL INVESTMENT INCOME 7,132,794
--------------
EXPENSES:
Investment advisory fees 953,367
Transfer agent fees 28,145
Professional fees 44,100
Dividend expense on securities sold short 521,283
Directors' fees and expenses 38,961
Custodian fees 8,233
Legal fees 24,843
Insurance 12,444
Other 71,611
--------------
TOTAL EXPENSES 1,702,987
--------------
NET INVESTMENT INCOME 5,429,807
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 14,816,374
Change in unrealized appreciation (2,984,557)
--------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 11,831,817
--------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 17,261,624
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 17
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31, 2000 YEAR ENDED
(UNAUDITED) APRIL 30, 2000
---------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 5,429,807 $ 10,605,809
Net realized gain (loss) from investments 14,816,374 (37,032,384)
Net change unrealized appreciation on investments (2,984,556) 18,037,099
-------------- --------------
Net increase (decrease) in net assets resulting
from operations 17,261,625 (8,389,476)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income -- (784,760)
Net realized gains on investments -- (19,326,589)
-------------- --------------
Net distributions to shareholders -- (20,111,349)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 24,171,936 44,145,283
Distributions reinvested in shares -- 18,325,045
Cost of shares redeemed (19,670,798) (215,816,216)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM CAPITAL SHARE TRANSACTIONS 4,501,138 (153,345,888)
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS: 21,762,763 (181,846,713)
NET ASSETS:
Beginning of period 215,188,933 397,035,646
-------------- --------------
End of period (Including undistributed $ 236,951,696 $ 215,188,933
net investment income of ============== ==============
$20,880,994 and $12,742,377 respectively)
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 18
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months Ended Years Ended April 30,
October 31, 2000 --------------------------------------------------------------
(Unaudited) 2000 1999 1998 1997 1996
---------------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Selected Per Share Data:
Net asset value, beginning of period $ 19.57 $ 21.12 $ 18.68 $ 15.77 $ 14.49 $ 11.35
---------- ---------- ---------- ---------- -------- --------
Income (loss) from Investment Operations:
Net investment income 0.70 1.06 0.53 0.25 0.22 0.27
Net realized and unrealized gain(loss)
on investments 0.83 (1.17) 3.08 3.75 2.95 3.31
---------- ---------- ---------- ---------- -------- --------
Total from investment operations 1.53 (0.11) 3.61 4.00 3.17 3.58
---------- ---------- ---------- ---------- -------- --------
Less Distributions:
From net investment income -- (0.06) (0.42) (0.21) (0.24) (0.44)
From net realized gain on investments -- (1.38) (0.75) (0.88) (1.65) --
---------- ---------- ---------- ---------- -------- --------
Total distributions -- (1.44) (1.17) (1.09) (1.89) (0.44)
---------- ---------- ---------- ---------- -------- --------
Net asset value, end of period $ 21.10 $ 19.57 $ 21.12 $ 18.68 $ 15.77 $ 14.49
========== ========== ========== ========== ======== ========
Total Return 7.82% (0.02)% 19.43% 25.77% 23.24% 31.80%
Ratios and Supplemental Data:
Net assets, end of period(in 000's) $ 236,952 $ 215,189 $ 397,036 $ 157,823 $ 60,632 $ 38,030
Ratios to average net assets:
Expenses before dividends on securities
sold short 1.03% 0.92% 0.89% 1.17% 1.26% 1.38%
Expenses from dividends sold short 0.45% 0.48% 0.49% 0.05% 0.08% 0.18%
---------- ---------- ---------- ---------- -------- --------
Total expenses 1.48% 1.40% 1.38% 1.22% 1.34% 1.56%
Net investment income 4.72% 3.53% 3.21% 2.54% 2.01% 1.94%
Portfolio turnover 260% 392% 378% 200% 229% 222%
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
The Caldwell & Orkin Market Opportunity Fund (the "Fund") is the only active
investment portfolio of The Caldwell & Orkin Funds, Inc., an open-end,
diversified management investment company registered under the Investment
Company Act of 1940, as amended. The Fund's objectives are to provide long-term
capital growth with a short-term focus on capital preservation through
investment selection and asset allocation. The Fund seeks to outperform the
stock market over the long-term, as measured by indices such as the S&P 500 with
Income.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
SECURITIES VALUATION:
Securities are stated at the closing price on the date at which the net
asset value is being determined. If the date of determination is not a
trading date, the securities are valued as of the last trading date
proceeding the date of determination. Short-term investments having a
maturity of 60 days or less at the time of the purchase are stated at
amortized cost, which approximates market value.
SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME:
Securities transactions are accounted for on the trade date plus one
day. Dividend income is recorded on the ex-dividend date and interest
income is recorded as earned. Realized gains and losses from investment
transactions are determined using the specific identification method.
CASH:
The Fund maintains cash available for the settlement of securities
transactions and capital shares reacquired. Available cash is invested
daily in money market instruments.
INCOME TAXES:
As a qualified investment company under Subchapter M of the Internal
Revenue Code, the Fund is not subject to income taxes to the extent
that it distributes all of its taxable income. It is the Fund's policy
to meet the requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its taxable
income to its shareholders.
During the six months ended October 31, 2000 there was an adjustment
made to paid-in-capital, in the amount of $9,273,991, resulting from a
permanent book-to-tax difference.
CAPITAL ACCOUNTS:
The Fund follows the provisions of Statement of Position 93-2,
"Determination, Disclosure and Financial Statement Presentation of
Income, Capital Gain and Return of Capital Distributions by Investment
Companies."
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
2. AGREEMENTS WITH THE ADVISOR AND DISTRIBUTOR:
The Fund has entered into a management agreement with C&O Funds
Advisor, Inc. (the "Advisor") pursuant to which the Advisor provides
space, facilities, equipment and personnel necessary to perform
administrative and management services for the Fund. The management
agreement provides that the Advisor is responsible for the actual
management of the Fund's portfolio. For such services and expenses
assumed by the Advisor, the Fund pays a monthly advisory fee at
incremental annual rates as follows:
<TABLE>
<CAPTION>
Advisory Fee Average Daily Net Assets
------------ ------------------------
<S> <C>
.90% Up to $100 million
.80% In excess of $100 million but not greater than $200 million
.70% In excess of $200 million but not greater than $300 million
.60% In excess of $300 million but not greater than $500 million
.50% In excess of $500 million
</TABLE>
The Advisor has agreed to reimburse the Fund to the extent necessary to
prevent the Fund's annual ordinary operating expenses (excluding taxes,
brokerage commissions and extraordinary charges such as litigation
costs) from exceeding 2.0% of the Fund's average daily net assets. No
such reimbursement was required for the six months ended October 31,
2000.
The Fund has entered into a distribution agreement with IFS Fund
Distributors, Inc. (the "Distributor") pursuant to which the
Distributor provides broker/dealer services for the Fund. The
Distributor is responsible for the sales and redemptions of the shares
of the Fund. The Distributor does not charge the Fund for these
services.
C&O Funds Advisor, Inc. is a wholly-owned subsidiary of Caldwell &
Orkin, Inc. IFS Fund Distributors, Inc. is a wholly-owned subsidiary of
Integrated Fund Services, Inc.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENT PORTFOLIO TRANSACTIONS:
INVESTMENT PURCHASES AND SALES:
For the six months ended October 31, 2000, purchases and proceeds from
sales of investments (excluding securities sold short and short-term
investments) aggregated $234,352,258 and $216,140,119, respectively.
SHORT SALES AND SEGREGATED CASH:
Short sales are transactions in which the Fund sells a security it does
not own, in anticipation of a decline in the market value of that
security. To complete such a transaction, the Fund must borrow the
security to deliver to the buyer upon the short sale; the Fund is then
obligated to replace the security borrowed by purchasing it in the open
market at some later date.
The Fund will incur a loss if the market price of the security
increases between the date of the short sale and the date on which the
Fund replaces the borrowed security. The Fund will realize a gain if
the security declines in value between those dates.
All short sales must be fully collateralized. The Fund maintains the
collateral in segregated accounts consisting of cash and/or U.S.
Government securities sufficient to collateralize the market value of
its short positions. Typically, the segregated cash with brokers and
other financial institutions exceeds the minimum requirements.
The Fund may also sell short "against the box", i.e., the Fund enters
into a short sale as described above, while holding an offsetting long
position in the security which it sold short. If the Fund enters into a
short sale against the box, it will segregate an equivalent amount of
securities owned by the Fund as collateral while the short sale is
outstanding.
The Fund limits the value of its short positions (excluding short sales
"against the box") to 60% of the Fund's total net assets. At October
31, 2000, the Fund had 31.78% of its total net assets in short
positions.
For the six months ended October 31, 2000, the cost of investments
purchased to cover short sales and proceeds from investments sold short
were $253,942,018 and $216,236,691, respectively.
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS:
Capital share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended Year ended
October 31, 2000 April 30, 2000
---------------- --------------
<S> <C> <C>
Shares sold 1,191,536 2,208,212
Shares issued in connection with reinvestment
of distributions -- 1,009,088
Shared reacquired (960,477) (11,021,188)
------------ ------------
Net increase (decrease) in shares outstanding 231,059 (7,803,888)
------------ ------------
</TABLE>
5. RELATED PARTY TRANSACTIONS:
As of October 31, 2000, Caldwell & Orkin, Inc. and Michael B. Orkin had
ownership of the Fund of 0.04% and 1.33%, respectively.
22
<PAGE> 23
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
<TABLE>
<S> <C>
BOARD OF DIRECTORS TRANSFER, REDEMPTION & DIVIDEND
Michael B. Orkin, President & Chairman DISBURSING AGENT
Frederick T. Blumer Integrated Fund Services, Inc.
David L. Eager 221 East Fourth Street
Robert H. Greenblatt Suite 300
Randall P. Martin Cincinnati, OH 45202
Henry H. Porter, Jr.
INDEPENDENT ACCOUNTANTS
Tait, Weller & Baker
INVESTMENT ADVISER Eight Penn Center Plaza
C&O Funds Advisor, Inc. Suite 800
Suite 150 Philadelphia, PA 19103-2108
6200 The Corners Parkway
Norcross, GA 30092
LEGAL COUNSEL
Kilpatrick Stockton LLP
DISTRIBUTOR 1100 Peachtree Street
IFS Fund Distributors, Inc. Suite 2800
221 East Fourth Street Atlanta, GA 30309-4530
Suite 300
Cincinnati, OH 45202
CUSTODIAN
Bank One Ohio Trust Company, N.A.
235 West Schrock Road
Westerville, OH 43081
</TABLE>
FUND INFORMATION
The Fund is closed to new investors. For information please call (678)
533-7850 or (800) 237-7073. For information about a specific Market
Opportunity Fund account, please call (800) 467-7903.
FUND LISTINGS
The Fund is listed in The Wall Street Journal, Investor's Business Daily, The
New York and many local newspapers as C&OMKTOPP or CALDORKMO.
Its quotation symbol is COAGX.
These financial statements are submitted for the general information of the
shareholders of The Caldwell & Orkin Market Opportunity Fund. They are not
authorized for distribution to prospective investors unless preceded or
accompanied by an effective prospectus.
THE CALDWELL & ORKIN MARKET OPPORTUNITY FUND
SUITE 150
6200 THE CORNERS PARKWAY
NORCROSS, GA 30092
E-MAIL: [email protected]
