Rule 497(b)
File No. 333-09227
GINTEL ERISA FUND
6 GREENWICH OFFICE PARK
GREENWICH, CONNECTICUT 06831
Fellow Shareholder:
We are holding a Special Meeting of Shareholders on September 26,1996,
to seek your approval for the merger of Gintel ERISA Fund into Gintel Fund. On
June 10, 1996, the Board of Trustees approved the proposed reorganization based
upon the recommendations of Gintel Equity Management, Inc., the Adviser to both
Funds.
After the proliferation of mutual funds over the last five years, we
are seeing a growing trend towards consolidation in the mutual fund industry.
Many smaller management companies, such as ours, are merging their funds in
order to more efficiently manage their portfolios, reduce fees for their
shareholders through economies of scale, and better focus their limited
marketing resources.
The Board of Trustees and I believe the reorganization of ERISA Fund
into Gintel Fund benefits ERISA Fund shareholders because it lowers operating
expenses, provides a greater number of portfolio investments, enables
shareholders to track the Gintel Fund's performance in the daily newspapers, and
allows the investment staff to focus on producing the best results for one
single fund. In addition, the Gintel Fund has had a superior investment record
over the lifespan of the Funds.
Although the Gintel ERISA Fund also seeks investment income as part of
its investment objective, we believe that the investment objectives of both
Funds are similar -- to achieve capital appreciation through investment in
equities. In addition, the investment policies and philosophies employed to
reach this objective are essentially the same. The primary difference between
these two Funds has been that ERISA Fund only accepts tax-exempt investors, has
been managed somewhat more conservatively, and has more readily accepted
short-term capital gains without regard for tax consequences.
Our Board of Trustees has concluded that the proposal is in the best
interests of the Gintel ERISA Fund and its shareholders and recommends that you
vote FOR the proposal. In order for the proposal to be approved, the holders of
a majority of the outstanding securities of the Gintel ERISA Fund entitled to
vote at the meeting must vote for the proposal. Please take the time to consider
this important matter and vote now.
In order to make sure that your vote is represented, indicate your
choices on the enclosed proxy card, date and sign it and return it in the
enclosed envelope.
I hope you will all join me in voting our shares for this proposal.
Sincerely,
Robert M. Gintel
Chairman
<PAGE>
GINTEL ERISA FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 26, 1996
A Special Meeting of Shareholders (the "Meeting") of the Gintel ERISA
Fund (the "Gintel ERISA Fund") will be held on September 26, 1996 at 3:00 p.m.
Eastern time, at the offices of Gintel ERISA Fund, 6 Greenwich Office Park,
Greenwich, Connecticut 06831 for the following purposes, which are more fully
described in the accompanying Prospectus/Proxy Statement dated August 30, 1996:
1. To approve an Agreement and Plan of Reorganization providing for
the transfer of the assets of the Gintel ERISA Fund to the Gintel
Fund in exchange for shares of the Gintel Fund and the
distribution of such shares to shareholders of the Gintel ERISA
Fund in liquidation of the Gintel ERISA Fund; and
2. To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
The Board of Trustees of the Company fixed the close of business on
August 23, 1996 as the record date for determination of shareholders entitled to
notice of, and to vote at, the Meeting or any adjournment thereof. The enclosed
proxy is being solicited on behalf of the Board of Trustees of the Fund.
Each shareholder who does not expect to attend in person is requested
to complete, date, sign and return promptly the enclosed form of proxy.
By order of the Board of
Trustees,
Donna K. Grippe
Secretary
Dated: August 30, 1996
YOUR VOTE IS IMPORTANT
Please indicate your voting instructions on the enclosed proxy card, sign and
date it, and return it in the envelope provided, which needs no postage if
mailed in the United States. In order to save any additional expense of further
solicitation, please mail your proxy promptly.
<PAGE>
GINTEL ERISA FUND
6 GREENWICH OFFICE PARK
GREENWICH, CONNECTICUT 06831
COMBINED PROSPECTUS/PROXY STATEMENT
August 30, 1996
This Combined Prospectus/Proxy Statement is sent to you in connection
with the solicitation of proxies by the Board of Trustees (the "Board") of the
Gintel ERISA Fund for a Special Meeting of Shareholders (the "Meeting") to be
held at the offices of Gintel ERISA Fund, 6 Greenwich Office Park, Greenwich,
Connecticut 06831 on September 26, 1996, at 3:00 p.m., Eastern time, at which
shareholders of the Gintel ERISA Fund will be asked to consider and approve a
proposed Agreement and Plan of Reorganization (the "Plan").
The Plan provides for the transfer of the assets of the Gintel ERISA
Fund to the Gintel Fund, in exchange for shares of the Gintel Fund. Following
such transfer, shares of the Gintel Fund will be distributed to the existing
shareholders of the Gintel ERISA Fund. As a result of the proposed transactions,
each shareholder of the Gintel ERISA Fund will receive that number of full and
fractional shares of the Gintel Fund equal in value at the close of business on
the date of the exchange to the value of that shareholder's shares of the Gintel
ERISA Fund. These transactions are referred to as the "Reorganization." (The
Gintel Fund and the Gintel ERISA Fund are sometimes referred to as a "Fund" and
together as the "Funds").
Each Fund is an open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), and each is
organized as a Massachusetts business trust. The investment objective of the
Gintel Fund is to achieve capital appreciation by investing in equities. The
primary investment objective of the Gintel ERISA Fund is to maximize total
investment returns through a combination of long-term appreciation and
investment income, and it also will invest for short-term capital gains, when,
in the Adviser's opinion, market conditions make such action appropriate.
The investment adviser to both Funds is Gintel Equity Management, Inc.
(the "Adviser").
This Prospectus/Proxy Statement, which you should keep for future
reference, sets forth concisely the information about the Gintel Fund that a
prospective investor should know before voting. THIS PROSPECTUS/PROXY STATEMENT
IS ACCOMPANIED BY THE PROSPECTUS OF THE GINTEL FUND DATED MAY 1, 1996, WHICH IS
INCORPORATED BY REFERENCE IN ITS ENTIRETY. A Statement of Additional Information
dated August 30, 1996 relating to this Prospectus/Proxy Statement (the "Related
Statement of Additional Information") has been filed with the Securities and
Exchange Commission (the "Commission") and is included herein. Information about
the Gintel ERISA Fund is incorporated by reference to the Prospectus dated May
1, 1996 and the semi-annual report to shareholders for the six months ended June
30, 1996, which may be obtained without charge by writing to the Gintel ERISA
Fund at 6 Greenwich Office Park, Greenwich, Connecticut 06831, or by calling the
Gintel ERISA Fund at 800-243-5808.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
SYNOPSIS
This Synopsis provides a concise summary of the information contained
in this Prospectus/Proxy Statement.
THE AGREEMENT AND PLAN OF REORGANIZATION You are being asked to approve an
Agreement and Plan of
Reorganization. Under the Plan, the
Gintel ERISA Fund will transfer its
assets to the Gintel Fund in
exchange for shares of the Gintel
Fund and the assumption by the
Gintel Fund of the liabilities of
the Gintel ERISA Fund. After the
transaction, you will receive that
number of shares of the Gintel Fund
with a total value equal to the net
asset value of your shares of the
Gintel ERISA Fund, as determined at
the close of business on the date
of the exchange. You will not be
charged a sales charge for this
transaction. See "Reasons for the
Transaction" and "Information About
the Transaction," and the copy of
the form of the Plan, which is
attached as Exhibit A.
TAX CONSEQUENCES Each Fund will receive an opinion
of counsel to the effect that no
gain or loss will be recognized by
the Gintel ERISA Fund, the Gintel
Fund, or the shareholders of the
Gintel ERISA Fund as a result of
the Reorganization. See
"Information about the
Transaction."
INVESTMENT OBJECTIVES AND POLICIES Gintel Fund. The investment
objective of the Gintel Fund is to
achieve capital appreciation by
investing in equities. Toward this
end, the Gintel Fund invests in
common stocks or securities
convertible into common stock.
Gintel ERISA Fund. The primary
investment objective of the Gintel
ERISA Fund is to maximize total
investment return through a
combination of long-term
appreciation and investment income,
and it will also invest for
short-term capital gains, when, in
the Advisers's opinion, market
conditions make such action
appropriate. Toward this end, the
Gintel ERISA Fund invests in common
stocks or securities convertible
into common stock, as well as fixed
income securities or debt
instruments.
Each Fund has additional investment
policies which are similar and
which are discussed under
"Comparison of the Funds'
Investment Objectives and
Policies," below.
-2-
<PAGE>
MANAGEMENT OF THE FUNDS
Investment Adviser Gintel Equity Management, Inc. (the
"Adviser") is the investment
adviser for each Fund. See
"Information About the Funds."
Administrator Gintel & Co. Limited Partnership is
the administrator for each Fund.
See "Information About the Funds."
Fees and Expenses The investment advisory and
administrative services fees are
identical for each Fund. Because
the administrative services fees
are at breakpoints based on assets,
it is anticipated that due to a
larger asset base shareholders will
be subject to lower overall levels
of administrative services fees and
total fund expenses for the
foreseeable future as a result of
the Reorganization. See "Comparison
of Fees and Expenses.
TRUSTEES AND OFFICERS The Trustees and officers are
identical for each Fund and will
remain the same after the
Reorganization.
DISTRIBUTION AND PURCHASE PROCEDURES; The procedures for purchasing and
EXCHANGE RIGHTS; REDEMPTION PROCEDURES redeeming shares are materially the
same for each Fund, and each Fund
has materially similar exchange
privileges.
OTHER CONSIDERATIONS In the event the shareholders of
the Gintel ERISA Fund do not
approve the Reorganization, the
Fund will continue its current
operations. Shareholders have no
right of appraisal, but may
continue to redeem their shares in
accordance with normal Fund
policies.
This Synopsis is qualified by reference to the more complete information
contained elsewhere in this Prospectus/Proxy Statement, including information
incorporated herein from the attached Prospectus for the Gintel Fund dated May
1, 1996 (the "Prospectus"), and in the form of Agreement and Plan of
Reorganization attached to this Prospectus/Proxy Statement as Exhibit A.
RISK FACTORS
In general, the investment policies and risk factors of the Gintel Fund
and the Gintel ERISA Fund are similar. As described more fully below under
"Comparison of the Funds' Investment Objectives and Policies," the principal
risk factors of investing in the Gintel Fund in comparison to those of the
Gintel ERISA Fund are as follows:(1) the Gintel Fund may invest in non-U.S.
securities while the Gintel ERISA Fund may not;(2) each Fund may lend its
portfolios securities to brokers, dealers and other institutional investors
(although the Gintel Fund may not do so in an amount in excess of 10% of its
total assets); (3) each Fund, subject to certain restrictions, may invest in
other investment companies; (4) each Fund will not make short sales of
securities or maintain short positions unless at all times when a short position
is open the Fund owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issues as, and equal in an amount to, the securities
sold short; (5) the Gintel Fund may invest in all types of debt securities, in
any proportion and may invest in investment-grade debt securities which are
considered to be those rated Baa-3 or higher by Moody's Investors Service, Inc.
or BBB- or higher by Standard & Poor's Corporation. Securities rated Baa-3 and
BBB- are considered to have speculative characteristics. The Gintel ERISA Fund
may
-3-
<PAGE>
invest in fixed income securities or debt instruments; (6) the Gintel Fund will
not invest in securities judged by the Adviser to be of poor quality, although
it may invest in unrated securities if the Adviser determines that such
securities present attractive investment opportunities and are of comparable
quality to the other debt securities in which the Gintel Fund may invest; (7)
the Gintel Fund may, from time to time, borrow money to the maximum extent
permitted by the Investment Company Act from banks at prevailing interest rates
and invest the funds in additional securities, a technique known as leveraging,
(which it has done infrequently and only for short periods over the lifespan of
the Fund) while the Gintel ERISA Fund may not borrow money, except it may borrow
up to 5% of the value of its total assets at the time of such borrowing from
banks for temporary or emergency purposes (which it has never done); and (8)
each Fund has adopted the following restrictions which may not be changed
without shareholder approval:(i)with respect to 50% of its assets, it will not
at the time of purchase invest more than 5% of its total assets, at market
value, in the securities of any one issuer (except the securities of the United
States Government); and (ii) with respect to the other 50% of its assets, it
will not invest at the time of purchase more than 25% (15%, with respect to the
Gintel ERISA Fund) of the market value of its total assets in any single issuer.
These two restrictions, hypothetically, could give rise to a portfolio with as
few as twelve (fourteen, with respect to the Gintel ERISA Fund) issuers.
COMPARISON OF FEES AND EXPENSES
The following tables summarize and compare the fees and expenses of the
Funds. These tables are intended to assist shareholders in comparing the various
costs and expenses that shareholders indirectly bear with respect to an
investment in the Gintel ERISA Fund and those that they can expect to bear
indirectly as shareholders of the Gintel Fund. Actual expenses may be more or
less than those set forth below. In addition, the "Example" set forth below
should not be considered a representation of future expenses, which will vary
depending upon actual investment returns and expenses.
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Total
Management Other Operating
Fee 12b-1 Fees Expenses* Expenses*
- --------------------------------------------------------------------------
Gintel Fund 0.99% --- 1.26% 2.25%
Gintel ERISA Fund 1.04% --- 1.41% 2.45%
Pro Forma for 0.96% --- 1.15% 2.11%
Combined Fund
(6/30/96)
* Includes brokerage commissions, which are paid under the Fund's
Administrative Services Agreement. Although the maximum advisory fee is
1% and the maximum administrative services fee is 1 1/4% of the first
$50 million, 1 1/8% of the next $50 million, and 1% on assets over $100
million, timing differences between the way the expense ratio is
calculated (daily, based on net assets for the fiscal year) and the
manner in which the fees are paid (quarterly, based on the previous
three months average daily net assets) may cause the operating expense
ratio to exceed or fall below these fee rates, but in no case is either
Fund actually charged more or less than the prescribed fees.
-4-
<PAGE>
Example
Using the above expenses, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return and redemption at the end of each of the
periods shown:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------
Gintel Fund $23 $70 $121 $259
Gintel ERISA Fund 25 76 131 279
Pro Forma for
Combined Funds 21 66 113 244
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CONDENSED FINANCIAL INFORMATION. Condensed financial information with
respect to the Funds is incorporated by reference herein and is included in the
Prospectuses and Statements of Additional Information dated May 1, 1996 and in
the annual and semi-annual reports to shareholders.
INFORMATION ABOUT THE TRANSACTION
AGREEMENT AND PLAN OF REORGANIZATION. The Plan provides that on the
Closing Date (as defined below) for the Reorganization, substantially all of the
assets of the Gintel ERISA Fund will be transferred to the Gintel Fund.
In exchange for the transfer of the assets of the Gintel ERISA Fund,
the Gintel Fund will assume the liabilities of the Gintel ERISA Fund and will
issue to the Gintel ERISA Fund full and fractional shares of the Gintel Fund.
The Gintel ERISA Fund will distribute the shares so received to the shareholders
of the Gintel ERISA Fund, whose shares in the Gintel ERISA Fund will become
void. Shareholders of the Gintel ERISA Fund at the time of the Reorganization
will become shareholders of the Gintel Fund and will receive the same dollar
amount in Gintel Fund shares as the shareholder had held in the Gintel ERISA
Fund.
The share transfer books of the Gintel ERISA Fund will be permanently
closed as of the close of business on the business day immediately preceding the
Closing Date of the Reorganization. Redemption requests received thereafter by
the Gintel ERISA Fund will be deemed to be redemption requests relating to
shares of the Gintel Fund.
The current fundamental policies (changeable only by shareholder vote)
of the Gintel ERISA Fund, including any limitations set forth in the By-laws of
the Gintel ERISA Fund, could be deemed to prevent it from taking the actions
necessary to effectuate the Reorganization as described in this Combined
Prospectus/Proxy Statement. In general, these policies may prohibit the Gintel
ERISA Fund from purchasing more than a stated percentage of another company
(which may be deemed to include the Gintel Fund, in connection with its
Reorganization). By approving the Plan, shareholders will be deemed to have
agreed to waive the application of any such fundamental policies to the extent
necessary to consummate its Reorganization.
The Reorganization is subject to a number of other conditions,
including the receipt of certain legal opinions described in the Plan, the
continued accuracy of the representations and warranties in the Plan, certain
regulatory approvals and the parties' performance in all material respects of
their respective agreements and undertakings in the Plan. Assuming satisfaction
of the conditions in the Plan, the closing date for the Reorganizations will be
on September 30, 1996, or such other date as is agreed to by the parties (the
"Closing Date").
-5-
<PAGE>
The Plan provides that the Board of the Gintel ERISA Fund may terminate
the Plan and abandon the Reorganization at any time prior to the Reorganization,
notwithstanding approval thereof by shareholders, if, in the judgment of the
Board, proceeding with the Reorganization would be inadvisable. The Board of
Trustees of the Gintel Fund may terminate the Plan and abandon the
Reorganization contemplated thereby if any of the conditions set forth in the
Plan have not been satisfied. In the event of any such termination, there will
be no liability for damages on the part of either party to the other.
The Gintel Fund and The Gintel ERISA Fund will pay the ordinary and
reasonable costs and expenses of the Reorganization and all transactions
contemplated by the Plan, prorated according to the relative asset size.
DESCRIPTION OF SHARES OF THE GINTEL FUND. Full and fractional shares of
the Gintel Fund will be issued to the shareholders of the Gintel ERISA Fund in
accordance with the procedures under the Plan as described above. Each share
will be fully paid and nonassessable when issued and transferrable without
restriction and will have no preemptive or conversion rights.
EXPENSES. The Reorganization will be effected for each Gintel ERISA
Fund shareholder at net asset value without the imposition of any sales charges.
No certificates for the Gintel Fund shares will be issued unless requested in
writing.
SHAREHOLDER APPROVAL. Approval of the Plan requires the affirmative
vote of a majority of the votes entitled to be cast of the Gintel ERISA Fund.
The Board may terminate the Plan at any time prior to the closing of
the transaction.
REASONS FOR THE TRANSACTION
The Board considered the Reorganization at a meeting on June 10, 1996.
At the meeting, the Adviser recommended to the Trustees that they approve, and
recommend to the shareholders of the Gintel ERISA Fund for their approval, a
Reorganization of the Gintel ERISA Fund into the Gintel Fund, in accordance with
the terms of the Plan.
In accepting the Adviser's recommendation, the Board considered the
fact that the Adviser is the investment adviser to both Funds. In addition, the
Board considered the similarities of the investment objectives (each Fund seeks
capital appreciation; the Gintel ERISA Fund also seeks investment income) and
policies of the Funds and the fact that the Funds share the same service
providers. The Board also considered that the investment record of the Gintel
Fund has been superior to that of the Gintel ERISA Fund over a significant
period of time.
Given the above factors and the similarity in the investment strategies
of the Gintel ERISA Fund and the Gintel Fund, the Board concluded that combining
the two Funds would be appropriate and would enable the shareholders of the
combined portfolio to benefit from certain economies of scale, including a lower
expense ratio than that currently experienced by the Gintel ERISA Fund, while
also affording shareholders the continuing opportunity to participate in a
portfolio of equity securities. In addition, the Board concluded that the
Reorganization benefits the Gintel ERISA Fund shareholders because a combined
fund will provide a greater number of portfolio investments, will enable
shareholders to track the Gintel Fund's performance in the daily newspapers, and
will allow the investment staff to focus on producing the best results for one
combined fund. The Board also agrees with the Adviser that by combining the
Funds, the Adviser will be able to concentrate its marketing resources on a
single equity fund to attract investors interested in such a fund.
The Adviser indicated to the Board its belief that the most appropriate
method of combining the Gintel ERISA Fund into the Gintel Fund would be through
an acquisition of the assets of the Gintel ERISA Fund by the Gintel Fund.
In reaching its decision to recommend shareholder approval of the
Reorganization, the Board made inquiries into a number of factors. The Board was
informed of the expense ratios of the Funds as described above.
-6-
<PAGE>
The Board also considered the following comparative investment
performance information regarding the Funds:
Total Return Information
------------------------
From January 18, 1982
(commencement of
operations of Gintel
One Year Period ended ERISA Fund) to
December 31, 1995 December 31, 1995
--------------------- ---------------------
Gintel Fund 30.97% 446.13%
Gintel ERISA Fund 26.62% 356.97%
The factors considered by the Board included, among other things: (1)
recent and anticipated asset and expense levels of the Funds and future
prospects of each Fund; (2) the similarity of the investment advisory,
distribution and administration arrangements, the fact that the Funds have the
same custodian, transfer agent, dividend paying agent and independent
accountants (the "Service Providers"); (3) that combining the assets of the two
Funds is expected to result in lower administrative services fees because the
breakpoints, which are based on asset size, will be applied to a larger asset
base; (4) the terms and conditions of the Reorganization; and (5) the similarity
of the investment objectives, policies and restrictions of the two Funds.
Based upon these factors, the Trustees unanimously determined that the
transaction would not result in dilution of the interests of, and would be in
the best interest of, the shareholders of each of the Funds and recommended that
the shareholders of the Gintel ERISA Fund approve the Reorganization and the
Plan. The Trustees present at the June 10, 1996 Board Meeting constituted a
majority of all of the Trustees and a majority of those Trustees who are not
"interested persons" of the Adviser or the Funds, within the meaning of the 1940
Act (the "Independent Trustees").
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Reorganization is subject to the condition that the
Gintel ERISA Fund and the Gintel Fund receive an opinion from counsel to the
Gintel Fund stating that for federal income tax purposes: (i) the exchange by
the Gintel ERISA Fund of substantially all its assets in exchange for shares of
the Gintel Fund and the assumption by the Gintel Fund of the liabilities of the
Gintel ERISA Fund pursuant to the Plan will constitute a reorganization within
the meaning of section 368(a)(1)(C) or 368(a)(1)(D) of the Code, respectively,
depending upon whether shareholders of the Gintel ERISA Fund receive in the
aggregate less than fifty percent, or fifty percent or more, of the shares of
the Gintel Fund; (ii) the Gintel ERISA Fund will not recognize any gain or loss
as a result of the Reorganization; (iii) the Gintel Fund will not recognize any
gain or loss on the receipt of the assets of the Gintel ERISA Fund in exchange
for shares of the Gintel Fund; (iv) the shareholders of the Gintel ERISA Fund
will not recognize any gain or loss on the exchange of their Gintel ERISA Fund
shares for the Gintel Fund shares in the Reorganization; (v) the aggregate tax
basis of shares of the Gintel Fund received by each shareholder of the Gintel
ERISA Fund will be the same as the aggregate tax basis of the shares of the
Gintel ERISA Fund exchanged therefor; (vi) the Gintel Fund's adjusted tax bases
in the assets received from the Gintel ERISA Fund in the Reorganization will be
the same as the adjusted tax bases of such assets in the hands of the Gintel
ERISA Fund immediately prior to the Reorganization; (vii) the holding period of
each former shareholder of the Gintel ERISA Fund in the shares of the Gintel
Fund received in the Reorganization will include the period during which such
shareholder held his shares of the Gintel ERISA Fund as a capital asset; and
(viii) the Gintel Fund's holding periods in the assets received from the Gintel
ERISA Fund in the Reorganization will include the holding periods of such assets
in the hands of the Gintel ERISA Fund immediately prior to the Reorganization.
The Gintel ERISA Fund and the Gintel Fund have not sought a tax ruling
from the Internal Revenue Service ("IRS") with respect to the tax aspects of the
Reorganization, but will act in reliance upon the opinion of counsel discussed
in the preceding paragraph. Such opinion is not binding on the IRS and does not
preclude the IRS from adopting a contrary position. If for any reason the
Reorganization of the Gintel ERISA Fund did not qualify as a tax-free
-7-
<PAGE>
reorganization for federal income tax purposes, then (i) the transfer of the
Gintel ERISA Fund's assets to the Gintel Fund would be treated as a taxable sale
or exchange of those assets at fair market value, and (ii) the exchange by the
shareholders of the Gintel ERISA Fund of their Gintel ERISA Fund shares for the
Gintel Fund shares would be treated as a taxable exchange of the Gintel ERISA
Fund shares, also at fair market value. Shareholders should consult their own
advisers concerning that and other potential tax consequences of the
Reorganization to them, including any applicable state and local income tax
consequences.
CAPITALIZATION. The following table shows the capitalization of the
Gintel ERISA Fund and the Gintel Fund as of June 30, 1996, and on a pro forma
basis as of that date giving effect to the proposed acquisition of assets at net
asset value:
Gintel ERISA Gintel Pro Forma
Fund Fund Combined
------------ ------------ ------------
Net assets $ 28,922,915 $109,772,129 $138,695,044
(As of 6/30/96)
NAV per share: $ 31.98 $ 17.94 $ 17.94
Shares outstanding: 904,500 6,118,707 7,730,910
COMPARISON OF THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
GENERAL. The investment objectives and policies of the Funds are
similar. Although the Gintel ERISA Fund also seeks investment income as part of
its investment objective, both Funds seek appreciation by investing in a
non-diversified portfolio of common stocks. Each Fund invests in major
corporations whose shares are listed on the New York Stock Exchange or the
American Stock Exchange. Each Fund may also invest in securities traded in the
Over-the-Counter market (with respect to the Gintel ERISA Fund, such securities
must, in the opinion of the Adviser, be non-speculative, and such investments
may not exceed 25% of its total assets at time of purchase). Although each Fund
has flexibility to invest in a broad range of corporations, neither will
purchase the securities of any corporation with a record of less than three
years' continuous operations, including that of predecessors. Each Fund may lend
its portfolio securities to brokers, dealers and other institutional investors
(with respect to the Gintel Fund, in an amount not to exceed 10% of its total
assets). Each Fund, subject to certain restrictions, may invest in other
investment companies. Neither Fund will make short sales of securities or
maintain short positions unless at all times when a short position is open the
Fund owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities of
the same issue as, and equal in an amount to the securities sold short. This is
a technique known as selling short "against the box."
The Gintel Fund may, from time to time, borrow money to the maximum
extent permitted by the Investment Company Act from banks at prevailing interest
rates and invest the funds in additional securities. Since inception in 1981,
the Gintel Fund has borrowed approximately eight times for relatively short
periods. The Gintel Fund's borrowings are limited so that immediately after such
borrowings the value of assets (including borrowings) less liabilities (not
including borrowings) is at least three times the amount of the borrowings.
Should the Gintel Fund, for any reason, have borrowings that do not meet the
above test then, within three days (not including Sundays and holidays), the
Fund must reduce such borrowings so as to meet the necessary test. Under such a
circumstance, the Gintel Fund may have to liquidate fund securities at a time
when it is disadvantageous to do so. Gains made with additional funds borrowed
will generally cause the net asset value of the Gintel Fund's shares to rise
faster than could be the case without borrowings. Conversely, if investment
results fail to cover the cost of borrowings, the net asset value of the Fund
could decrease faster than if there had been no borrowings. The Gintel ERISA
Fund may not borrow money, except it may borrow up to 5% of the value of its
total assets at the time of such borrowing from banks for temporary or emergency
purposes; however, at no time has the Gintel ERISA Fund ever borrowed for any
purpose.
-8-
<PAGE>
GINTEL ERISA FUND. The primary investment objective of the Gintel ERISA
Fund is to maximize total investment return through a combination of long-term
appreciation and investment income, and it also will invest for short-term
capital gains, when, in the Adviser's opinion, market conditions make such
action appropriate. Toward this end, the Fund invests in common stocks or
securities convertible into common stock, as well as fixed income securities or
debt instruments.
GINTEL FUND. The investment objective of the Gintel Fund is to achieve
capital appreciation by investing in equities. Toward this end, the Fund invests
in common stocks or securities convertible into common stock. Current income is
not the Fund's investment objective; however, when, in the Adviser's opinion,
market conditions warrant a temporary defensive position, there is no
restriction on the Fund's investment in debt instruments, including tax-exempt
bonds. Similarly, there may be occasions when the Fund will have all or a
portion of its portfolio invested in cash or cash equivalents for such temporary
defensive purposes.
The Gintel Fund may invest in all types of debt securities, in any
proportion, including debt obligations of the U.S. Treasury, its agencies and
instrumentalities, bonds, notes, mortgage securities, government and government
agency obligations, zero coupon securities, convertible securities, and
repurchase agreements. The Fund may invest in investment-grade debt securities
which are considered to be those rated Baa-3 or higher by Moody's Investor
Service, Inc. or BBB- or higher by Standard & Poor's Corporation. Securities
rated Baa-3 and BBB- are considered to have speculative characteristics. The
Fund will not invest in securities judged by the Adviser to be of poor quality,
although it may invest in unrated securities if the Adviser determines that such
securities present attractive investment opportunities and are of comparable
quality to the other debt securities in which the Fund may invest.
Up to 20% of the Gintel Fund's total assets may be invested in non-U.S.
securities however, since inception, the Gintel Fund has only invested in
non-U.S. securities on an infrequent basis. There are certain risks involved in
investing in non-U.S. securities, including those resulting from fluctuations in
currency exchange rates, reevaluation of currencies, future political and
economic developments and the possible imposition of currency exchange
regulations or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
non-U.S. companies are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory practices and requirements
comparable to those applicable to domestic companies. Moreover, securities of
many non-U.S. companies may be less liquid and their prices more volatile than
those of securities of comparable domestic companies. In addition, with respect
to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund.
INFORMATION ABOUT THE FUNDS
INVESTMENT ADVISORY AGREEMENTS. The investment advisory agreement
between the Gintel Fund and the Adviser (the "Investment Advisory Agreement")
contains terms that are the same as those set forth in the current investment
advisory agreement between the Gintel ERISA Fund and the Adviser.
The Adviser, a Connecticut corporation with its principal offices at 6
Greenwich Office Park, Greenwich, Connecticut 06831, is registered with the
Commission as an investment adviser and, in addition to managing the Funds, has
been managing discretionary investment accounts for individual investors,
corporate pension funds and profit sharing plans, charitable foundations,
universities and others since 1971.
The Investment Advisory Agreement provides that the Adviser identify
and analyze possible investments for the Fund and determine the amount, timing,
and form of such investments. The Adviser has the responsibility of monitoring
and reviewing the Fund's portfolio, on a regular basis, and recommending the
ultimate disposition of such investments. It is the Adviser's responsibility to
cause the purchase and sale of securities in the Fund's portfolio, subject at
all times to the policies set forth by the Board of Trustees.
ADVISORY AND DISTRIBUTION FEES. Under the current investment advisory
agreements of the Gintel ERISA Fund and the Gintel Fund, each Fund pays the
Adviser advisory fees at the rate of 1.00% of average daily net assets.
-9-
<PAGE>
ADMINISTRATOR. Gintel & Co. Limited Partnership acts as administrator
for both Funds(the "Administrator"). For each Fund, the Administrator is paid a
maximum administration fee of 1.25% on the first $50 million in average daily
net assets; 1.125% on the next $50 million; and 1.00% over $100 million.
EXPENSE RATIOS. As of December 31, 1995 the Gintel ERISA Fund had total
net assets of approximately $27,766,076 and the Gintel Fund had total net assets
of approximately $96,738,857. As of December 31, 1995, the total expense ratios
for the Gintel ERISA Fund and Gintel Fund were 2.45% and 2.25%, respectively.
See "Comparison of Fees and Expenses," below. The maximum administrative
services fee, payable at the beginning of each quarter based on average daily
net assets during the preceding quarter, is 1.25% of the first $50 million of
the average daily net assets of each Fund, 1.125% of the next $50 million of the
average daily net assets of each Fund and 1.00% of the average daily net assets
in excess of $100 million. The operating expense ratio for each Fund, which is
calculated on the basis of average assets during the fiscal year, may be higher
or lower than these figures due to timing differences caused by payment of these
administrative services fees on a trailing-quarter rather than fiscal-year
basis. After the Reorganization, it is expected that total operating expenses of
the combined Gintel Fund will be approximately 2.17%. (Please note that each
Fund's expense ratio includes brokerage commissions on portfolio transactions
paid for under a Fund's administrative services fee, and, therefore, may appear
higher than those of other mutual funds as well as for the Fund in prior years.
Other mutual funds do not include brokerage commissions in their operating
expense, but instead add them to the cost of securities purchased or deduct them
from the proceeds of securities sold.)
DIVIDENDS AND DISTRIBUTIONS. It is each Fund's policy to distribute to
shareholders all of its investment income (net of expenses) and any capital
gains (net of capital losses) in accordance with the timing requirements imposed
by the Internal Revenue Code of 1986. Distributions to shareholders will be
treated in the same manner for Federal income tax purposes whether received in
cash or reinvested in additional shares of a Fund.
PURCHASE PROCEDURES AND EXCHANGE PRIVILEGES. The Funds have identical
purchase procedures (except for the minimum initial investment required) and
exchange privileges. Shares of both Funds are sold on a continuous basis at net
asset value.
REDEMPTION PROCEDURES. The Funds offer identical redemption features
pursuant to which proceeds of a redemption are remitted to shareholders.
GENERAL. Each Fund is a Massachusetts business trust and has identical
rights under its Agreement and Declaration of Trust and applicable Massachusetts
law. Each share of a Fund is entitled to one vote for all purposes.
Massachusetts law does not require registered investment companies, such as the
Funds, to hold annual meetings of shareholders and it is anticipated that
shareholder meetings will be held only when specifically required by federal or
state law. Shareholders have available certain procedures for the removal of
Trustees. Each Fund indemnifies trustees and officers to the fullest extent
permitted under Massachusetts law.
ADDITIONAL INFORMATION
This Prospectus/Proxy Statement and the Related Statement of Additional
Information do not contain all of the information set forth in the registration
statement and the exhibits relating thereto filed by the Fund with the
Commission under the Securities Act of 1933 and the 1940 Act, to which reference
is hereby made.
Information about the Gintel Fund is included in the Prospectus dated
May 1, 1996, a copy of which is included herewith and incorporated by reference
herein. Additional information about the Gintel Fund is included in the
Statement of Additional Information dated May 1, 1996, which has been filed as
part of the Related Statement of Additional Information of this Combined
Prospectus/Proxy Statement, dated August 30, 1996 and is included herein.
Both Funds file proxy material, reports and other information with the
Commission. These documents and other information can be inspected and copied at
the Public Reference Facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of such material can also be
obtained from the Public Reference Branch,
-10-
<PAGE>
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549 at prescribed rates.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION
This Prospectus/Proxy Statement is being furnished in connection
with the solicitation of proxies by the Board for the Meeting. It is expected
that the solicitation of proxies will be primarily by mail. Representatives of
the Adviser and the Fund and service contractors retained by the Fund, may
contact shareholders directly to discuss the proposal set forth herein, and may
also solicit proxies by telephone, telegraph or personal interview. The Gintel
Fund and the Gintel ERISA Fund will bear the cost of solicitation of proxies. It
is anticipated that banks, broker-dealers and other institutions will be
requested to forward proxy materials to beneficial owners and to obtain
authorization for the execution of proxies. The Gintel Fund and the Gintel ERISA
Fund may, upon request, reimburse banks, broker-dealers and other institutions
for their expenses in forwarding proxy materials to beneficial owners.
Only shareholders of record of the Gintel ERISA Fund at the close of
business on August 23, 1996 (the "Record Date"), will be entitled to vote at the
Meeting. As of the Record Date, there were 890,271.837 shares of the Gintel
ERISA Fund issued and outstanding. As of August 23, 1996, the following persons
owned of record or beneficially 5% or more of the outstanding shares of either
class of shares of the Gintel ERISA Fund:
Number of Percentage of
Name Shares Owned Fund Outstanding
---- ------------ ----------------
Brophy Engraving Co. 126,633.787 14.22%
Employees Retirement Trust
attn: Rex L. Brophy
626 Harper Avenue
Detroit, Michigan 48202
Robert M. Gintel 87,655.387 9.85%
6 Greenwich Office Park
Greenwich, Connecticut 06831
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in accordance with the
instructions thereon. In the absence of any instructions, such proxy will be
voted to approve the Reorganization. Any shareholder giving a proxy may revoke
it at any time before the Meeting by submitting to the Fund a written notice of
revocation or a subsequently executed proxy, or by attending the Meeting and
voting in person.
If a proxy represents a broker "non-vote" (that is, a proxy from a
broker or nominee indicating that such person has not received instructions from
the beneficial owner or other person entitled to vote shares on a particular
matter with respect to which the broker or nominee does have discretionary
power) or marked with an abstention (collectively, "abstentions"), the shares
represented thereby will be considered to be present at the meeting for purposes
of determining the existence of a quorum for the transaction of business.
QUORUM AND ADJOURNMENTS
A quorum is constituted by the presence in person or by proxy of
the holders of a majority of the total number of shares outstanding and entitled
to vote, with respect to the Gintel ERISA Fund. If a quorum is not present at
the Meeting, or if a quorum is present but sufficient votes to approve the
Reorganization are not received, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies (but
-11-
<PAGE>
not more than 120 days after the original record date). In determining whether
to adjourn the Meeting, the following factors may be considered: the nature of
the proposals that are the subject of the Meeting, the percentage of votes
actually cast, the percentage of negative votes actually cast, the nature of any
further solicitation and the information to be provided to shareholders with
respect to the reasons for the solicitation. Any adjournment will require the
affirmative vote of a majority of those shares represented at the Meeting in
person or by proxy. The persons named as proxies will vote for or against an
adjournment based on their determination of what is in the best interests of the
shareholders, taking into consideration the factors discussed above. A
shareholder vote may be taken prior to any adjournment if sufficient votes have
been received for approval.
APPRAISAL RIGHTS
The Agreement and Declaration of Trust of the Gintel ERISA Fund does
not grant shareholders any rights of share appraisal. Shareholders have the
right to redeem their shares of the Gintel ERISA Fund at net asset value at any
time until the close of business on the business day prior to the Closing Date
of the Reorganization and, thereafter, shareholders may redeem from the Gintel
Fund the Gintel Fund shares acquired by them in the Reorganization.
OTHER BUSINESS
The Board of Trustees of the Gintel ERISA Fund knows of no other
business to be brought before the Meeting. However, if any other matters come
before the Meeting, proxies that do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named as Proxies.
FUTURE SHAREHOLDER PROPOSALS
Pursuant to rules adopted by the Commission under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), Shareholders may request
inclusion in the Fund's proxy statement for an annual meeting of shareholders
proposals that they intend to introduce at such meeting. Any such proposals must
be presented a reasonable time before the proxy materials for the next meeting
are sent to shareholders. The submission of a proposal does not guarantee its
inclusion in the proxy statement and is subject to limitations under the 1934
Act. The Fund does not hold annual meetings of shareholders. For this reason, no
anticipated date of the next meeting, if any, can be provided.
THE BOARD OF TRUSTEES, INCLUDING A MAJORITY OF THE INDEPENDENT TRUSTEES, OF
GINTEL ERISA FUND RECOMMEND APPROVAL OF THE PLAN.
MISCELLANEOUS
FINANCIAL STATEMENTS.
The financial statements of the Funds included in the Related Statement
of Additional Information relating to this Prospectus/Proxy Statement have been
audited by Richard A. Eisner & Company, LLP, independent accountants, for the
periods indicated in their report thereon, which is included in the annual
report to shareholders for the year ended December 31, 1995. The financial
statements of the Gintel Fund for the six months ended June 30, 1996, which are
included in the semi-annual report to shareholders and which have not been
audited, are also included by reference in the Related Statement of Additional
Information.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROSPECTUS/PROXY
STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND,
IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY GINTEL FUND OR THE ADVISER. THIS
PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION
IN WHICH SUCH AN OFFERING MAY NOT LAWFULLY BE MADE.
-12-
<PAGE>
EXHIBIT A
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan") is made this ___ day of
_______, 1996, by and among the Gintel ERISA Fund (the "ERISA Fund") and the
Gintel Fund (the "Gintel Fund"), each a Massachusetts business trust.
W I T N E S S E T H :
WHEREAS, the ERISA Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, this Plan is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986,
as amended, such reorganization to consist of the transfer of substantially all
of the assets of the ERISA Fund in exchange for shares of beneficial interest,
no par value, of the Gintel Fund ("New Shares"), the assumption by the Gintel
Fund of the liabilities of the ERISA Fund, and the distribution, after the
Closing (as defined in Section 3) of New Shares to the shareholders of the ERISA
Fund, all upon the terms and conditions hereinafter set forth in this Plan (the
"Reorganization"); and
WHEREAS, the Board of Trustees of the ERISA Fund and the Gintel Fund, including
a majority of the Trustees who are not interested persons of the ERISA Fund or
the Gintel Fund, within the meaning of the 1940 Act, has determined with regard
to the ERISA Fund and the Gintel Fund that participating in the transactions
contemplated by this Plan is in the best interests of the ERISA Fund and the
Gintel Fund and that the interests of shareholders of the ERISA Fund and the
Gintel Fund will not be diluted as a result of such transactions.
NOW, THEREFORE, the Board of Trustees of the ERISA Fund and the Gintel Fund
hereby adopts and declares the following Plan:
1. TRANSFER OF ASSETS.
Subject to the terms and conditions set forth herein, at the Closing
the ERISA Fund shall transfer substantially all of the assets of the ERISA Fund
to the Gintel Fund, and in consideration therefor, the Gintel Fund shall assume
all of the Liabilities (as defined herein), and issue to the ERISA Fund, on
behalf of the ERISA Fund, New Shares having an aggregate net asset value equal
to the value of the assets of the ERISA Fund transferred less the Liabilities
assumed. "Liabilities" shall mean the liabilities and obligations reflected in
an unaudited statement of assets and liabilities of the ERISA Fund as of the
close of business on the Valuation Date (as hereinafter defined), determined in
accordance with generally accepted accounting principles consistently applied
from the ERISA Fund's most recently completed audit period. The net asset value
of the New Shares and the value of the net assets of the ERISA Fund to be
transferred shall be determined as of the close of regular trading on the New
York Stock Exchange on the business day next preceding the Closing (the
"Valuation Date") using the valuation procedures set forth in the then current
prospectus and statement of additional information of the Gintel Fund.
2. ISSUANCE OF THE NEW SHARES.
Upon the consummation of the transactions referred to in Section 1, the
New Shares will be issued to the ERISA Fund, to be credited to the accounts of
shareholders of record of the ERISA Fund at the close of business on the
Valuation Date. At or as soon as practicable after the Closing, the New Shares
will be distributed to such shareholders in exchange for and in liquidation and
cancellation of the shares of the ERISA Fund, each such shareholder to receive
the number of New Shares that is equal in dollar amount to the value of shares
of beneficial interest of the ERISA Fund held by such shareholder as of the
close of business on the Valuation Date. Such distribution will be accomplished
by the establishment of an open account on the share records of the Gintel Fund
in the name of each shareholder of the ERISA Fund and representing the
respective number of New Shares due such shareholder. For these purposes, the
shareholders of record of the ERISA Fund as of the close of business on the
Valuation Date shall be certified by the ERISA Fund's transfer agent.
<PAGE>
3. CLOSING AND CLOSING DATE
The closing for the Reorganization (the "Closing") shall occur on
September 30, 1996, or on such other date as may be mutually agreed upon in
writing by the parties to the Reorganization (the "Closing Date"). The Closing
shall be held at the offices of the ERISA Fund or at any other location mutually
agreeable to the parties hereto. All transactions taking place at the Closing
shall be deemed to take place simultaneously as of 9:00 a.m. eastern time on the
Closing Date unless otherwise provided.
4. COVENANTS WITH RESPECT TO THE GINTEL FUND AND THE ERISA FUND
4.1 The ERISA Fund will call a special meeting of shareholders (the
"Meeting") for the purposes of (i) considering adoption of this Plan by the
shareholders of the ERISA Fund; and (ii) considering such other business as may
properly come before such Meeting.
4.2 The ERISA Fund covenants that the Gintel Fund Shares to be issued
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in connection with the Reorganization contemplated by this
Plan.
4.3 The ERISA Fund will assist the Gintel Fund in obtaining such
information as the Gintel Fund reasonably requests concerning the beneficial
ownership of the shares of the ERISA Fund.
4.4 Subject to the provisions hereof, the Gintel Fund and the ERISA
Fund will take, or cause to be taken, all actions, and do or cause to be done,
all things reasonably necessary, proper or advisable to consummate and make
effective the transactions contemplated herein, including the obtaining of any
required regulatory approvals.
4.5 The ERISA Fund shall furnish to the Gintel Fund at the Closing
Date, a final statement of the ERISA Fund's assets and liabilities as of the
Closing Date, which statement shall be certified by the ERISA Fund as being
determined in accordance with generally accepted accounting principles
consistently applied or in accordance with another mutually agreed upon
standard.
4.6 The Gintel Fund has prepared and filed, or will prepare and file,
with the Securities and Exchange Commission (the "SEC") a registration statement
on Form N-14 under the Securities Act of 1933, as amended (the "1933 Act"),
relating to the New Shares of the Gintel Fund (the "Form N-14 Registration
Statement"). The ERISA Fund has provided or will provide the Gintel Fund with
such information and documents relating to the ERISA Fund as are requested by
the Gintel Fund and as are reasonably necessary for the preparation of the
Prospectus/Proxy Statement set forth in the Form N-14 Registration Statement,
and information relating to the notice of meeting and form of proxy, other
information needed for the Form N-14 Registration Statement and any other proxy
solicitation materials to be used in connection with the Meeting (collectively,
the "Proxy Materials"). The Gintel Fund will use all reasonable efforts to have
the Registration Statement become effective under the 1933 Act as soon as
practicable, and will take all actions, if any, required by law to qualify the
New Shares to be issued in the Reorganization under the laws of the states in
which such qualification is required.
4.7 The ERISA Fund: (a) as soon after the Closing Date as is reasonably
practicable, shall prepare and file all federal and other tax returns and
reports as may be required by law to be filed with respect to all periods ending
on or before the Closing Date but not theretofore filed and (b) shall submit for
payment to the Gintel Fund the amount of any federal and other taxes, if any,
shown as due thereon which were not paid on or before the Closing Date and shall
reflect on the unaudited statement of assets and liabilities of the ERISA Fund
referred to in paragraphs 1 and 4.5 all Federal and other taxes, if any, that
remain unpaid as of the Closing Date.
4.8 The Gintel Fund agrees to use all reasonable efforts to maintain in
effect the approvals and authorizations required by the 1933 Act, the 1940 Act
and such of the state securities laws as may be necessary and as it may deem
appropriate in order to continue to conduct its operations through the Closing
Date and to consummate the Reorganization, as contemplated herein. The Gintel
Fund agrees to use all reasonable efforts to operate substantially in accordance
with its then current Prospectus and Statement of Additional Information,
including qualifying as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") through the Closing Date
ii
<PAGE>
and for at least one (1) year thereafter, although the Gintel Fund may merge or
consolidate during such one-year period with an investment company with
investment objectives, policies and restrictions and other characteristics
comparable (or, in the case of expense ratios, more favorable) to those of the
Gintel Fund.
5. REPRESENTATIONS AND WARRANTIES
5.1 The Gintel Fund represents and warrants to the ERISA Fund as
follows:
(a) The Gintel Fund is a business trust validly existing under
the laws of the Commonwealth of Massachusetts and is duly registered as
an open-end, management investment company under the 1940 Act;
(b) The Gintel Fund is not in violation of, and the execution,
delivery and performance of this Plan will not result in a violation
of, the Gintel Fund's Agreement and Declaration of Trust or By-Laws or
result in a material breach or violation of, or constitute a material
default under, any agreement or other undertaking to which the Gintel
Fund is a party or by which it or its assets is bound;
(c) The execution, delivery and performance of this Plan has
been duly authorized by all necessary action on the part of the Gintel
Fund, and assuming this Plan is enforceable against the ERISA Fund,
this Plan is a valid and binding obligation of the Gintel Fund
enforceable in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights and to general equity
principles;
(d) Except as disclosed in writing to and accepted by the
ERISA Fund, no litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or to
its knowledge threatened against the Gintel Fund or any of its
properties or assets, and the Gintel Fund knows of no facts that might
form the basis for the institution of any such proceedings (other than
routine inquiries and examinations), and the Gintel Fund is not a party
to or subject to the provisions of any order, decree or judgment of any
court or governmental body that materially and adversely affects, or is
reasonably likely to materially and adversely affect, its business or
its ability to consummate the transactions contemplated herein;
(e) All of the Gintel Fund's issued and outstanding shares
representing interests in the Gintel Fund are, and on the Closing Date
will be, duly authorized and validly issued and outstanding, and fully
paid and non-assessable (except as disclosed in the Gintel Fund's
Prospectus and recognizing that, under Massachusetts law, shareholders
of the Gintel Fund could, under certain circumstances, be held
personally liable for obligations of the Gintel Fund), and no
shareholder has any preemptive rights to purchase any such shares, and
the Gintel Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of its shares (other than
dividend reinvestment plans of the Gintel Fund or as set forth in this
Plan), nor are there outstanding any securities convertible into any
shares of the Gintel Fund (except pursuant to exchange privileges
described in the current Prospectus and Statement of Additional
Information of the Gintel Fund);
(f) The Gintel Fund Shares to be issued and delivered by the
Gintel Fund to the ERISA Fund pursuant to the terms hereof will have
been duly authorized as of the Closing Date and, when so issued and
delivered, will be duly authorized and validly issued, fully paid and
non-assessable (except as disclosed in the Gintel Fund's Prospectus and
recognizing that, under Massachusetts law, shareholders of the Gintel
Fund could, under certain circumstances, be held personally liable for
obligations of the Gintel Fund), and have been or will be duly
registered under the 1933 Act and qualified for sale under the laws of
such states where such qualification is required;
(g) All issued and outstanding shares of the Gintel Fund have
been offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and applicable
state securities laws;
(h) From the effective date of the Form N-14 Registration
Statement through the time of the Meeting and the Closing Date, the
Form N-14 Registration Statement (exclusive of those portions based
upon written information regarding the ERISA Fund which fully and
fairly discloses such information) (i) complies in all
iii
<PAGE>
material respects with the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the 1940 Act, and the rules and
regulations thereunder and (ii) does not and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and as of such dates and times, any written
information furnished by the Gintel Fund to the ERISA Fund for use in
the Proxy Materials does not contain and will not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the information provided not misleading;
(i) The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets of the Gintel Fund as
of and for the Gintel Fund's most recent fiscal year, certified by
Richard A. Eisner & Company, LLP, and the unaudited Statement of Assets
and Liabilities, Statement of Operations and Statement of Changes in
Net Assets for the Gintel Fund's most current completed six month
period within the fiscal year, if any (copies of which have been or
will be furnished to the ERISA Fund, if available) fairly present, in
all material respects, the Gintel Fund's financial condition as of such
dates and its results of operations for such periods in accordance with
generally accepted accounting principles consistently applied, and as
of such dates there were no liabilities of the Gintel Fund (contingent
or otherwise) known to the Gintel Fund that were not disclosed therein
but that would be required to be disclosed therein in accordance with
generally accepted accounting principles;
(j) Since the date of the most recent audited financial
statements, there has not been any material adverse change in the
Gintel Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, except
as otherwise disclosed in writing to and accepted by the ERISA Fund
prior to the Closing Date (for the purposes of this subparagraph (j),
neither a decline in the Gintel Fund's net asset value per share nor a
decrease in the Gintel Fund's size due to redemptions shall be deemed
to constitute a material adverse change);
(k) All federal and other tax returns and reports of the
Gintel Fund required by law to be filed on or before the Closing Date,
if any, shall have been filed, and all federal and other taxes owed by
the Gintel Fund shall have been paid so far as due, and to the best of
the Gintel Fund's knowledge, no such return is as of the date hereof
under audit and no material assessment has been asserted with respect
to any such return;
(l) For each full and partial taxable year from its inception
through the Closing Date, the Gintel Fund has qualified as a regulated
investment company under Subchapter M of the Code; and
(m) The Gintel Fund will provide to the ERISA Fund the Form
N-1A registration statement concerning the Gintel Fund, which will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make any
statements therein, in light of the circumstances under which such
statements were made, not materially misleading.
5.2 The ERISA Fund represents and warrants to the Gintel Fund as
follows:
(a) The ERISA Fund is a business trust validly existing under
the laws of the Commonwealth of Massachusetts, and is duly registered
as an open-end, management investment company under the 1940 Act;
(b) The ERISA Fund is not in violation of, and the execution,
delivery and performance of this Plan will not result in a violation
of, the ERISA Fund's Agreement and Declaration of Trust or By-Laws each
as amended to date, or result in a material breach or violation of, or
constitute a material default under, any agreement or other undertaking
to which the ERISA Fund is a party or by which it or its assets are
bound;
(c) The execution, delivery and performance of this Plan has
been duly authorized by all necessary action on the part of the ERISA
Fund, and assuming this Plan is enforceable against the Gintel Fund,
this Plan is a valid and binding obligation of the ERISA Fund,
enforceable in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights and to general equity
principles;
iv
<PAGE>
(d) Except as otherwise disclosed in writing to and accepted
by the Gintel Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the ERISA Fund or any of
its properties or assets, and the ERISA Fund knows of no facts that
might form the basis for the institution of any such proceedings (other
than routine inquiries and examinations), and the ERISA Fund is not a
party to or subject to the provisions of any order, decree or judgment
of any court or governmental body that materially and adversely
affects, or is reasonably likely to materially and adversely affect,
its business or its ability to consummate the transactions contemplated
herein;
(e) All of the ERISA Fund's issued and outstanding shares
representing interests in the ERISA Fund are, and on the Closing Date
will be, duly authorized and validly issued and outstanding, and fully
paid and non-assessable (except as disclosed in the ERISA Fund's
Prospectus and recognizing that, under Massachusetts law, shareholders
of the ERISA Fund could, under certain circumstances, be held
personally liable for obligations of the ERISA Fund) and all such
shares will, at the time of the Closing, be held by the Participating
Shareholders of Record as set forth on the books and records of the
ERISA Fund's transfer agent (and in the amounts set forth therein) and
as set forth in any list of Participating Shareholders of Record
provided to the Gintel Fund pursuant to paragraph 3.4, and no
Participating Shareholders of Record will have any preemptive rights to
purchase any of such shares and the ERISA Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of its shares (other than dividend reinvestment plans of
the ERISA Fund or as set forth in this Plan), nor are there outstanding
any securities convertible into any shares of the ERISA Fund (except
pursuant to exchange privileges described in the current Prospectus and
Statement of Additional Information of the ERISA Fund);
(f) All of the ERISA Fund's issued and outstanding shares have
been offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and applicable
state securities laws;
(g) From the effective date of the Form N-14 Registration
Statement through the time of the Meeting and the Closing Date, the
ERISA Fund's Proxy Materials (exclusive of any written information
furnished by the Gintel Fund for use in the Proxy Materials which fully
and fairly discloses such information) (i) comply in all material
respects with the applicable provisions of the 1934 Act and the 1940
Act and the rules and regulations thereunder and (ii) do not and will
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading, and as of such dates and time,
any written information furnished by the ERISA Fund to the Gintel Fund
for use in the Form N-14 Registration Statement does not and will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the information provided not
misleading;
(h) The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets of the ERISA Fund as
of and for the ERISA Fund's most recent fiscal year, certified by
Richard A. Eisner & Company, LLP and the unaudited Statement of Assets
and Liabilities, Statement of Operations and Statement of Changes in
Net Assets for the ERISA Fund's most recently completed six month
semi-annual fiscal period (copies of which have been or will be
furnished to the Gintel Fund) fairly present, in all material respects,
the ERISA Fund's financial condition as of such dates and its results
of operations for such periods in accordance with generally accepted
accounting principles consistently applied, and as of such dates there
were no liabilities of the ERISA Fund (contingent or otherwise) known
to the ERISA Fund that were not disclosed therein but that would be
required to be disclosed therein in accordance with generally accepted
accounting principles;
(i) Since the date of the most recent audited financial
statements, there has not been any material adverse change in the ERISA
Fund's financial condition, assets, liabilities or business, other than
changes occurring in the ordinary course of business, except as
otherwise disclosed in writing to and accepted by the Gintel Fund prior
to the Closing Date (for the purposes of this subparagraph (i), neither
a decline in the ERISA Fund's net asset value per share nor a decrease
in the ERISA Fund's size due to redemptions shall be deemed to
constitute a material adverse change);
v
<PAGE>
(j) All federal and other tax returns and reports of the ERISA
Fund required by law to be filed on or before the Closing Date shall
have been filed, and all federal and other taxes owed by the ERISA Fund
shall have been paid so far as due, and to the best of the ERISA Fund's
knowledge, no such return is as of the date hereof under audit and no
material assessment has been asserted with respect to any such return;
(k) For each full and partial taxable year from its inception
through the Closing Date, the ERISA Fund has qualified as a regulated
investment company under Subchapter M of the Code; and
(l) At the Closing Date, the ERISA Fund will have good and
marketable title, through its custodian, to the ERISA Fund Assets and
full right, power and authority to assign, deliver and otherwise
transfer the ERISA Fund Assets hereunder, and upon delivery and payment
for the ERISA Fund Assets as contemplated herein, the Gintel Fund will
acquire good and marketable title thereto, subject to no restrictions
on the ownership or transfer thereof other than such restrictions as
might arise under the 1933 Act.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ERISA FUND
The obligations of the ERISA Fund to complete the Reorganization shall
be subject, at the ERISA Fund's election, to the performance by the Gintel Fund,
of all the obligations to be performed by it hereunder on or before the Closing
Date, and in addition thereto, the following conditions with respect to the
Gintel Fund:
6.1 All representations and warranties of the Gintel Fund contained
herein shall be true and correct in all material respects as of the date hereof
and, except as they may be affected by the transactions contemplated herein, as
of the Closing Date, with the same force and effect as if made on and as of the
Closing Date.
6.2 The Gintel Fund shall have delivered to the ERISA Fund at the
Closing a certificate executed by one of its officers, dated as of the Closing
Date, to the effect that the representations and warranties of the Gintel Fund
made herein are true and correct at and as of the Closing Date, except as they
may be affected by the transactions contemplated herein, and as to such other
matters as the ERISA Fund shall reasonably request.
6.3 The ERISA Fund shall have received at the Closing an opinion of
legal counsel to the Gintel Fund, dated as of the Closing Date, in form
(including reasonable and customary qualifications and assumptions) reasonably
satisfactory to the ERISA Fund, substantially to the effect that:
(i) the Gintel Fund is a business trust validly existing under
the laws of the Commonwealth of Massachusetts and is duly registered as
an open-end, management investment company under the 1940 Act; (ii) the
execution, delivery and performance of this Plan will not result in a
violation of the Gintel Fund's Agreement and Declaration of Trust or
By-Laws; (iii) the execution, delivery and performance of this Plan
have been duly authorized by all necessary action on the part of the
Gintel Fund; (iv) the Gintel Fund Shares to be issued and delivered
pursuant to the terms of this Plan will have been duly authorized as of
the Closing Date and, when so issued and delivered, will be validly
issued, fully paid and non-assessable (except as disclosed in the
Gintel Fund's Registration Statement and recognizing that under
Massachusetts law, shareholders of the Gintel Fund could, under certain
circumstances, be held personally liable for obligations of the Gintel
Fund).
In rendering such opinion, legal counsel to the Gintel Fund
may rely on an opinion of Massachusetts counsel (with respect to
matters of Massachusetts law) and on certificates of officers or
trustees of the Gintel Fund, in each case reasonably acceptable to the
ERISA Fund.
6.4 As of the Closing Date, there shall have been no material change in
the investment objective, policies and restrictions of the Gintel Fund nor any
increase in the rate of permissible investment advisory or other fees or charges
payable by the Gintel Fund or its shareholders to the Gintel Fund's investment
adviser, distributor and/or administrator from those fees and charges described
in the current Prospectus of the Gintel Fund delivered to the ERISA Fund, and
there shall have been no change in any fee waiver or expense reimbursement
undertakings described in the Proxy Materials.
vi
<PAGE>
6.5 The Board of Trustees of the Gintel Fund, including a majority of
its trustees who are not "interested persons" of the Gintel Fund (as defined in
the 1940 Act), shall have determined that this Plan and the transactions
contemplated hereby are in the best interests of the Gintel Fund and that the
interest of shareholders of the Gintel Fund would not be diluted as a result of
such transactions, and the Gintel Fund shall have delivered to the ERISA Fund at
the Closing, a certificate, executed by an officer, to the effect that the
condition described in this paragraph has been satisfied.
6.6 The Gintel Fund shall have delivered to the ERISA Fund, pursuant to
paragraph 5.1(i), copies of financial statements as of and for its most recently
completed fiscal year.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE GINTEL FUND
The obligations of the Gintel Fund to complete the Reorganization shall
be subject, at the Gintel Fund's election, to the performance by the ERISA Fund
of all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions with respect to the
ERISA Fund:
7.1 All representations and warranties of the ERISA Fund contained
herein shall be true and correct in all material respects as of the date hereof
and, except as they may be affected by the transactions contemplated herein, as
of the Closing Date, with the same force and effect as if made on and as of the
Closing Date.
7.2 The ERISA Fund shall have delivered, in accordance with Article 1
hereof, to the Gintel Fund a statement of the ERISA Fund Assets and Liabilities
together, if required by the Gintel Fund, with a list of the ERISA Fund's
portfolio securities and other assets showing the respective adjusted bases and
holding periods thereof for income tax purposes, as of the Closing Date,
certified by an appropriate officer of the ERISA Fund.
7.3 The ERISA Fund shall have delivered to the Gintel Fund at the
Closing a certificate executed by one of its officers, and dated as of the
Closing Date, to the effect that the representations and warranties of the ERISA
Fund made herein are true and correct at and as of the Closing Date, except as
they may be affected by the transactions contemplated herein, and as to such
other matters as the Gintel Fund shall reasonably request.
7.4 The Gintel Fund shall have received at the Closing an opinion of
legal counsel to the ERISA Fund, dated as of the Closing Date, in form
(including reasonable and customary qualifications and assumptions) reasonably
satisfactory to the Gintel Fund, substantially to the effect that:
(i) the ERISA Fund is a business trust validly existing under
the laws of the Commonwealth of Massachusetts and is duly registered as
an open-end, management investment company under the 1940 Act; (ii) the
execution, delivery and performance of this Plan will not result in a
violation of the ERISA Fund's Agreement and Declaration of Trust or
By-laws; (iii) the execution, delivery and performance of this Plan
have been duly authorized by all necessary action on the part of the
ERISA Fund.
In rendering such opinion, legal counsel to the ERISA Fund may
rely on an opinion of Massachusetts counsel (with respect to matters of
Massachusetts law) and on certificates of officers or trustees of the trust, in
each case reasonably acceptable to the Gintel Fund.
7.5 The Gintel Fund shall have received from Richard A. Eisner &
Company, LLP a letter addressed to the ERISA Fund and the Gintel Fund and dated
as of the effective date of the Registration Statement in form and substance
satisfactory to the Gintel Fund, to the effect that:
(a) they are independent public accountants with respect to
the ERISA Fund within the meaning of the 1933 Act and the applicable
regulations thereunder;
(b) in their opinion, the financial statements and per unit
income and capital changes of the ERISA Fund included or incorporated
by reference in the Form N-14 Registration Statement and reported on by
them comply as to form in all material aspects with the applicable
accounting requirements of the 1933 Act and the regulations thereunder;
vii
<PAGE>
(c) on the basis of limited procedures agreed upon by the
Gintel Fund and the ERISA Fund and described in such letter (but not an
audit in accordance with generally accepted auditing standards) with
respect to the unaudited pro forma financial statements of the ERISA
Fund included in the Form N-14 Registration Statement and the Proxy
Materials, and inquiries of appropriate officials of the ERISA Fund or
the trustee(s) thereof responsible for financial and accounting
matters, nothing came to their attention which caused them to believe
that (i) such unaudited pro forma financial statements do not comply as
to form in all material respects with the applicable accounting
requirements of the 1933 Act and the published rules and regulations
thereunder, or (ii) such unaudited pro forma financial statements are
not fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the
audited financial statements; and
(d) on the basis of limited procedures agreed upon by the
Gintel Fund and the ERISA Fund and described in such letter (but not an
examination in accordance with generally accepted auditing standards),
the information relating to the ERISA Fund appearing in the Form N-14
Registration Statement and the Proxy Materials that is expressed in
dollars or percentages of dollars (with the exception of performance
comparisons) has been obtained from the accounting records of the ERISA
Fund or from schedules prepared by officers of the ERISA Fund having
responsibility for financial and reporting matters and such information
is in agreement with such records, schedules or computations made
therefrom.
7.6 The ERISA Fund shall have delivered to the Gintel Fund, pursuant to
paragraph 5.2(h), copies of financial statements of the ERISA Fund as of and for
its most recently completed fiscal year.
7.7 On the Closing Date, the ERISA Fund Assets shall include no assets
that the Gintel Fund, by reason of the Gintel Fund's Agreement and Declaration
of Trust, 1940 Act requirements or otherwise, may not legally acquire.
7.8 The Board of Trustees of the ERISA Fund, including a majority of
the trustees who are not "interested persons" of the ERISA Fund (as defined by
the 1940 Act) shall have determined that this Plan and the transactions
contemplated hereby are in the best interests of the ERISA Fund and that the
interests of the shareholders in the ERISA Fund would not be diluted as a result
of such transactions, and the ERISA Fund shall have delivered to the Gintel Fund
at the Closing, a certificate, executed by an officer, to the effect that the
condition described in this subparagraph has been satisfied.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ERISA FUND AND THE GINTEL
FUND
The obligations herein of the ERISA Fund and of the Gintel Fund to
effect the Reorganization are each subject to the further conditions that on or
before the Closing Date:
8.1 This Plan and the transactions contemplated herein shall have been
approved by the requisite vote of the shareholders of the ERISA Fund in
accordance with the applicable provisions of the ERISA Fund's Agreement and
Declaration of Trust and By-laws and the requirements of the 1940 Act, and
evidence of such approval shall have been delivered to the Gintel Fund.
8.2 No action, suit or other proceeding shall be pending or threatened
before any court or governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with, this Plan as it
relates to the Reorganization or any of the transactions related thereto.
8.3 All consents of other parties and all other consents, approvals and
permits of federal, state and local regulatory authorities (including, without
limitation, those of the SEC and of state securities authorities, including
"no-action" positions of or exemptive orders from such federal and state
authorities, and those of the Office of the Comptroller of the Currency ("OCC")
and the Department of Labor with respect to the Employee Retirement Income
Security Act of 1974 ("ERISA") or the Internal Revenue Service with respect to
the Code, deemed necessary by the Gintel Fund or the ERISA Fund to permit
consummation, in all material respects, of the Reorganization and transactions
related thereto shall have been obtained, except where failure to obtain any
such consent, order or permit would not, in the reasonable opinion of the party
asserting that the condition to closing has not been satisfied, involve a risk
of a material adverse effect on the assets or properties of the Gintel Fund or
the ERISA Fund involved in the Reorganization.
viii
<PAGE>
8.4 The Form N-14 Registration Statement and the Gintel Fund's
registration statement on Form N-1A covering the continuous offering of shares
of the Gintel Fund shall have become and shall be effective under the 1933 Act,
no stop orders suspending the effectiveness thereof shall have been issued and,
to the best knowledge of the ERISA Fund and the Gintel Fund, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5 The Gintel Fund and the ERISA Fund shall have received an opinion
of legal counsel to the Gintel Fund, dated the Closing Date of the
Reorganization, addressed to, and in form and substance satisfactory to, the
Gintel Fund and the ERISA Fund to the effect that: (i) the exchange by the ERISA
Fund of substantially all its assets in exchange for shares of the Gintel Fund
and the assumption by the Gintel Fund of the liabilities of the ERISA Fund
pursuant to the Plan will constitute a reorganization within the meaning of
section 368(a)(1)(C) or 368(a)(1)(D) of the Code, respectively, depending upon
whether shareholders of the ERISA Fund receive in the aggregate less than fifty
percent, or fifty percent or more, of the shares of the Gintel Fund; (ii) the
ERISA Fund will not recognize any gain or loss as a result of the
Reorganization; (iii) the Gintel Fund will not recognize any gain or loss on the
receipt of the assets of the Gintel ERISA Fund in exchange for shares of the
Gintel Fund; (iv) the shareholders of the Gintel ERISA Fund will not recognize
any gain or loss on the exchange of their the Gintel ERISA Fund shares for the
Gintel Fund shares in the Reorganization; (v) the aggregate tax basis of shares
of the Gintel Fund received by each shareholder of the Gintel ERISA Fund will be
the same as the aggregate tax basis of the shares of the Gintel ERISA Fund
exchanged therefor; (vi) the Gintel Fund's adjusted tax bases in the assets
received from the Gintel ERISA Fund in the Reorganization will be the same as
the adjusted tax bases of such assets in the hands of the Gintel ERISA Fund
immediately prior to the Reorganization; (vii) the holding period of each former
shareholder of the Gintel ERISA Fund in the shares of the Gintel Fund received
in the Reorganization will include the period during which such shareholder held
his shares of the Gintel ERISA Fund as a capital asset; and (viii) the Gintel
Fund's holding periods in the assets received from the Gintel ERISA Fund in the
Reorganization will include the holding periods of such assets in the hands of
the Gintel ERISA Fund immediately prior to the Reorganization.
9. BROKERAGE FEES AND EXPENSES
9.1 The ERISA Fund represents and warrants to the Gintel Fund, and the
Gintel Fund represents and warrants to the ERISA Fund, that there are no brokers
or finders entitled to receive any payments in connection with the transactions
provided for herein.
9.2 The ERISA Fund and the Gintel Fund confirm their understanding that
each party will be responsible for its own expenses in connection with the
Reorganization, whether or not consummated (excluding extraordinary expenses
such as litigation expenses, damages and other expenses not normally associated
with transactions of the type contemplated by this Plan).
10. CLOSING.
The Closing shall be held at the offices of the ERISA Fund and shall
occur prior to the commencement of business on (a) September 30, 1996, or (b) if
all regulatory or shareholder approvals shall not have been received by such
date, then on the first Monday following receipt of all necessary regulatory
approvals and the final adjourned meeting of shareholders of the ERISA Fund at
which this Plan is considered and approved, or (c) such later time as the ERISA
Fund may determine, giving consideration to the best interests of the ERISA
Fund. All acts taking place at the Closing shall be deemed to take place
simultaneously unless otherwise provided.
11. EXPENSES.
The expenses of the transactions contemplated by this Plan shall be
borne by the Gintel Fund and the ERISA Fund, whether or not the transactions
contemplated hereby are consummated.
ix
<PAGE>
12. TERMINATION.
12.1 With respect to the ERISA Fund and the Gintel Fund, this Plan may
be terminated, and the Reorganization and any related transactions involving the
ERISA Fund and the Gintel Fund contemplated hereby may be abandoned, at any time
prior to the Closing:
(a) by the mutual written consent of the ERISA Fund and the
Gintel Fund;
(b) by the ERISA Fund by written notice to the Gintel Fund,
without liability to the ERISA Fund on account of such termination
(provided the ERISA Fund is not otherwise in material default or breach
of this Plan) upon a finding by the Board of Trustees of the ERISA Fund
that in the judgment of such Board, proceeding with the Reorganization
would be inadvisable; or
(c) by either the ERISA Fund or the Gintel Fund by written
notice to the other, without liability to the terminating party on
account of such termination (provided the terminating party is not
otherwise in material default or breach of this Plan) if (i) the other
party shall fail to perform in any material respect its agreements
contained herein required to be performed prior to the Closing Date,
(ii) the other party materially breaches or shall have materially
breached any of its representations, warranties or covenants contained
herein, or (iii) any other condition herein expressed to be precedent
to the obligations of the terminating party has not been met and it
reasonably appears that it will not or cannot be met.
12.2 Termination of this Plan pursuant to paragraph 12.1(a) shall
terminate all obligations of the parties hereto with respect to the ERISA Fund
and the Gintel Fund affected by such termination and there shall be no liability
for damages on the part of the Gintel Fund, the ERISA Fund, or any of their
trustees, officers or employees, to any other party or its trustees, officers or
employees; provided, however, that notwithstanding any termination of this Plan
pursuant to paragraph 12.1, such termination shall not relieve the Gintel Fund
or the Gintel ERISA Fund of their obligations pursuant to paragraphs ___ and
___.
13. AMENDMENTS.
This Plan may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the ERISA
Fund and the Gintel Fund; provided, however, that following the approval of this
Plan by shareholders with respect to the ERISA Fund, no such amendment may have
the effect of changing the provisions for determining the number of New Shares
to be issued to shareholders of record, or otherwise materially and adversely
affecting the ERISA Fund, without further approval by shareholders of the ERISA
Fund in accordance with paragraph ___ hereof.
14. GOVERNING LAW.
This Plan shall be governed and construed in accordance with the laws
of Massachusetts, without giving effect to the conflicts of laws provisions
thereof.
15. FURTHER ASSURANCES.
The ERISA Fund, with respect to the ERISA Fund and the Gintel Fund,
shall take such further action, prior to, at, and after the Closing, as may be
necessary or desirable and proper to consummate the transactions contemplated
hereby.
x
<PAGE>
IN WITNESS WHEREOF, the Board of Trustees of the ERISA Fund has caused this Plan
to be executed on behalf of the ERISA Fund as of the date first set forth above
by their duly authorized representatives.
GINTEL ERISA FUND
Attest:
By:__________________________
- ----------------
GINTEL FUND
Attest:
By:__________________________
- ------------------
xi
<PAGE>
APPENDIX A
Management's Discussion of Fund Performance
Gintel Fund's net asset value per share increased 31% in 1995, with dividends
reinvested. A number of our key holdings appreciated more than 50%, including
Federal National Mortgage, Capstead Mortgage, Chart Industries, Checkpoint
Systems, and Charter One Financial. During the fourth quarter we decided to lock
in part of our profits and defer taxable gains by selling some of our holdings
short "against-the-box". We closed out these positions in early 1996, generating
long-term capital gains exceeding nine million dollars. At present, the Fund
holds a healthy 21% uninvested cash reserve.
Our predictions at the beginning of 1995 turned out to be remarkably accurate.
We were positive in the fact of inflationary concerns, forecasts of higher
interest rates, and fears of stock market overvaluations. The Dow Jones
Industrial Average gained almost 1300 points, while the bond markets experienced
strong price gains as well, with yields falling close to 15-year lows. Major
reasons for this excellent performance in the financial markets were continuing
economic growth, a 20% rise in corporate profits, minimal wage and price
inflation, an easing of interest rates, and the first serious attempt in
Washington to address the nation's fiscal problems and the way politicians have
managed our affairs.
Looking to the future, we see several crosscurrents which are likely to impact
stock prices in the months ahead:
o Budget talks for the moment are stalemated and the government is being
financed on a month-to-month basis. We believe a solution, either
temporary or permanent, will be reached soon; nevertheless, the
election in November should be particularly controversial and may well
become a great ideological debate over what Americans should expect
from their federal government.
o Weakness at the consumer retail level, where current recessionary
forces are being felt the most, has already precipitated a number of
bankruptcies. This could act as a restraint against wholesale price
pressures that otherwise would be building. We expect these conditions
to abate and retail sales to accelerate later in the year.
o Interest rates, particularly short-term rates, may trend lower if the
Federal Reserve Board moves to counteract recessionary forces which are
beginning to appear in the economy. We expect a reduction in short-term
rates of at least 25 to 50 basis points any time between now and the
end of summer.
o Corporate profits, as a whole, can be expected to rise at a more
moderate rate in the current slow-growth, price-constrained environment
we foresee in the months ahead.
o This year's market will be dominated by sector rotation in stock groups
rather than by the overall price rises which characterized the averages
in 1995.
We do not believe the major stock market indices will rise as sharply as they
did last year. Nevertheless, we are working to find individual stocks that will
produce a superior performance for us in 1996. We are searching for companies
selling at reasonable prices with strong balance sheets and good earnings
potential. We will continue to reevaluate all Fund holdings in this
ever-changing environment, while making new investments when opportunities
present themselves.
On December 28, 1995, a $0.944 per share dividend was paid to Gintel Fund
shareholders of record as of December 19, 1995, representing net investment
income and short-term capital gains of $0.177 per share and long-term capital
gains of $0.767 per share.
For those of our shareholders who also have money market accounts with us, the
UST Master Money Fund and Government Money Fund changed their names at year-end
to Excelsior Money Fund and Excelsior Government Money Fund. Both Funds continue
to be managed by U.S. Trust Company of New York.
<PAGE>
ANNUAL PERFORMANCE
GINTEL FUND
Comparative Performance of a $10,000 investment
1986-1995
S&P 500 GINTEL FUND S&P 500 ERISA FUND
--------------- -------------- --------------- ---------------
Annual Annual Annual Annual
Return Retrun Return Return
1985 $10,000 $10,000 $10,000 24.02% $10,000
1986 18.83% $11,883 20.84% $12,084 18.83% $11,883 22.39% $12,239
1987 5.22% $12,503 -14.26% $10,361 5.22% $12,503 -0.99% $12,118
1988 16.58% $14,576 29.35% $13,402 16.58% $14,576 21.99% $14,783
1989 31.98% $19,238 23.81% $16,593 31.98% $19,238 15.49% $17.072
1990 -3.17% $18,628 -5.66% $15,488 -3.17% $18,628 -5.12% $16,198
1991 30.51% $24,311 15.57% $17,899 30.51% $24,311 13.55% $18,393
1992 7.64% $26,169 24.70% $22,320 7.64% $26,169 14.44% $21,049
1993 10.05% $28,799 2.04% $22,775 10.05% $28,799 5.38% $22,182
1994 1.27% $29,165 -16.46% $19,027 1.27% $29,165 -21.30% $17,457
1995 37.53% $40,110 30.97% $24,919 37.53% $40,100 26.62% $22,104
GINTEL FUND
Average Annual Rates of Return
One(1) Year 31.0%
Five (5) Years 11.4%
Ten (10) Years 11.0%
Investment results are net of expenses, with dividends and capital gains
reinvested. The S&P 500 is a broad market-weighted average dominated by
blue-chip stocks.
Past results offer no assurance as to future performance. The investment return
and principal value of an investment will fluctuate, so that an investor's
shares, when redeemed, may be worth more or less than their original cost. The
Fund's prospectus contains more and should be read carefully.
<PAGE>
4
PROSPECTUS MAY 1, 1996
GINTEL FUND
Gintel Fund (the "Fund") is an open-end, non-diversified investment
company which seeks to provide capital appreciation by concentrating in a
manageable number of securities rather than broadly diversifying its portfolio.
The Fund offers and redeems its shares at net asset value. Investors pay no
sales charge or commissions to purchase shares of the Fund. The minimum initial
purchase is $5,000 including IRA's and Keogh's. There is no minimum for
additional investments. Minimum individual initial investments may be waived for
omnibus arrangements with certain broker dealers. Gintel Equity Management, Inc.
acts as investment advisor to the Fund.
OBJECTIVE-- To achieve capital appreciation by
investing in equities
NO SALES CHARGES-- No Sales Load No Redemption Fees No
12b-1 Fees
EXPENSE LIMITATION-- Advisory fees, brokerage
commissions, and operating expenses are
limited to a fixed percentage of assets.
MINIMUM INVESTMENT-- $5,000, including IRA's and Keogh's
ROUTINE SHAREHOLDER REPORTS-- We update
shareholders on the market and portfolio
four times a year, including Semi-Annual
and Annual Reports.
MANAGEMENT ALSO INVESTS IN THE FUND-- As of March
31, 1996, the employees of the Advisor
and their families owned 32.7% of the
Fund's shares.
This Prospectus sets forth concisely the information that a prospective
investor should know before investing in shares of the Fund and should be read
and retained for future reference. A Statement of Additional Information, dated
May 1, 1996, containing additional information about the Fund has been filed
with the Securities and Exchange Commission and is hereby incorporated by
reference into this Prospectus. A copy of the Statement of Additional
Information can be obtained without charge by calling (203) 622-6400 or writing
the Funds' Investment Advisor at 6 Greenwich Office Park, Greenwich, CT 06831.
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>
5
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases -- NONE
Maximum Sales Load Imposed on Reinvested Dividends -- NONE
Deferred Sales Load Imposed on Redemptions -- NONE Redemption Fees (as a
percentage of assets redeemed) -- NONE 12b-1 Fees -- NONE
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C>
Management Fees .99%
12b-1 Fees --
Other Expenses* 1.26%
----
Total Fund Operating Expense 2.25%
====
</TABLE>
* Includes brokerage commissions, which are paid under the Fund's Administrative
Services Agreement.
Example:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following $23 $70 $121 $259
expenses on a $1,000 investment,
assuming (a) 5% annual return and (b)
redemption at the end of each time period:
</TABLE>
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly and indirectly. (For more complete descriptions of the various
costs and expenses, see "Investment Advisor and Investment Advisory Agreement",
"Purchase of Shares" and "Distribution Plans".) The Expenses and Example
appearing in the table above are based on the Fund's expenses for the year ended
December 31, 1995. The Example shown in the table above should not be considered
a representation of past or future expenses, and actual expenses may be greater
or less than those shown. In addition, the 5% annual return cited in the Example
is hypothetical and is not representative of the Fund's actual performance.
2
<PAGE>
6
CONDENSED FINANCIAL INFORMATION
The following Per Share Income and Capital Changes table has been
examined by Richard A. Eisner & Company, LLP, independent auditors, whose report
dated January 22, 1996, expresses an unqualified opinion thereon. This table
should be read in conjunction with the financial statements, related notes, and
report of Richard A. Eisner & Company, LLP, all of which are included in the
Statement of Additional Information which may be obtained from the Fund upon
request and without charge. Further information about the Fund's performance is
contained in the annual report, which may be obtained without charge.
PER SHARE INCOME AND CAPITAL CHANGES*
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
YEAR
ENDED 12/31
--------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
-------- ------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of year $ 12.46 $ 15.11 $ 16.45 $ 13.48 $ 12.75 $ 14.18 $ 12.70 $ 9.82
Income from
Investment Operations
Net Investment Income(loss) (.01) .04 (.06) .09 .32 .46 1.10 .28
Net realized and unrealized
gain(loss) on securities 3.86 (2.53) .37 3.23 1.66 (1.40) 1.82 2.60
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment Income 3.85 (2.49) .31 3.32 1.98 (.94) 2.92 2.88
- ------------------------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income .01 .04 -- .10 .31 .49 1.44 --
Capital gains .93 .12 1.65 .25 .94 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions .94 .16 1.65 .35 1.25 .49 1.44 --
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Year $ 15.37 $12.46 $ 15.11 $16.45 $ 13.48 $ 12.75 $ 14.18 $ 12.70
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 31.0% -16.5% 2.0% 24.7% 15.6% -6.7% 23.8% 29.4%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of year (000) $96,739 $88,277 $136,110 $164,620 $77,408 $79,340 $94,566 $83,214
Ratio of operating expense to
average net assets 2.3%** 2.4%** 2.2%** 1.7%** 1.4% 1.5% 1.4% 1.6%
Ratio of net investment
income (loss) to average net assets (.1%) .3% (.3%) .9% 1.9% 3.1% 7.4% 2.5%
Portfolio turnover rate 55.4% 69.6% 50.8% 56.0% 66.3% 75.0% 65.4% 85.4%
Shares outstanding at end
of year (000) 6,296 7,085 9,009 10,010 5,741 6,223 6,667 1,250
</TABLE>
<TABLE>
<CAPTION>
7 MONTHS YEAR
ENDED 12/31 ENDED 5/31
----------- ----------
1987*** 1987
----------- ----------
<S> <C> <C>
Net Asset Value,
Beginning of year $ 13.58 $ 18.09
Income from
Investment Operations
Net Investment Income(loss) .17 .24
Net realized and unrealized
gain(loss) on securities (2.59) 1.69
- -----------------------------------------------------------------
Total from Investment Income (2.42) 1.93
- -----------------------------------------------------------------
Less: Distributions
Net investment income .30 .29
Capital gains 1.04 6.15
- -----------------------------------------------------------------
Total Distributions 1.34 6.44
- -----------------------------------------------------------------
Net Asset Value,
End of Year $ 9.82 $ 13.58
- -----------------------------------------------------------------
Total Return -19.8% 14.0%
- -----------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of year (000) $80,093 $121,458
Ratio of operating expense to
average net assets 1.2% 1.3%
Ratio of net investment
income (loss) to average net assets 2.3% 1.3%
Portfolio turnover rate 51.6% 111.4%
Shares outstanding at end
of year (000) 1,557 1,706
</TABLE>
* The above per share information is based upon a daily average of shares
outstanding, which has been restated to reflect the 5.241835/1 split on
September 25, 1992.
** The Fund's expense ratio includes brokerage commissions on portfolio
transactions paid for under the Fund's Administrative Services fee, and,
therefore, may appear higher than those of other mutual funds as well as
for the Fund in prior years.
*** Reflects changes in fiscal year from May 31 to December 31.
3
<PAGE>
7
DEBT INFORMATION
<TABLE>
<CAPTION>
MONTHLY
MONTHLY AVERAGE MONTHLY
AMOUNT OF AMOUNT OF REGISTRANT'S AMOUNT OF
DEBT OUT- DEBT OUT- SHARES OUT- DEBT PER
STANDING AT STANDING STANDING SHARE
END OF DURING THE DURING THE DURING THE
YEAR YEAR YEAR YEAR
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
1995 ......................... -0- $388,719 6,408,241 $0.06
1994 ......................... -0- -0- -0- -0-
1993 ........................ -0- -0- -0- -0-
1992 ......................... -0- $101,137 6,750,710 $.03
1991 ......................... -0- -0- -0- -0-
1990 ......................... -0- -0- -0- -0-
1989 ......................... -0- $ 595,250 1,261,102 $0.47
1988 ......................... $10,162,000 $3,116,500 1,373,639 $2.27
1987* ........................ -0- -0- 1,713,311 -0-
1987 ........................ -0- $1,204,917 1,544,743 $0.78
1986 ........................ $5,000,000 $ 973,077 1,449,381 $0.67
1985 ........................ -0- -0- -0- -0-
1984 ........................ -0- $4,081,764 1,188,094 $3.44
1983 ........................ $ 6,063,000 $1,312,151 897,338 $1.46
1982 ........................ -0- -0- -0- -0-
</TABLE>
* Seven month period from June 1, 1987 through December 31, 1987
THE FUND
Gintel Fund is a business trust formed under the laws of the
Commonwealth of Massachusetts. The Fund is an open-end, non-diversified
investment company as defined by the Investment Company Act of 1940, as amended
(the "1940 Act"). As an open-end investment company, the Fund has an obligation
to redeem its shares held by any investor at the net asset value of the shares
next determined after receipt of a redemption request in proper form. (See
"Redemption of Shares" in this Prospectus and "Computation of Net Asset Value"
in the Statement of Additional Information.) The Investment Advisor's office is
at 6 Greenwich Office Park, Greenwich, Connecticut 06831, and the telephone
number is (203) 622-6400.
INVESTMENT PERFORMANCE
The following table illustrates the total return from a hypothetical
investment in the Fund at inception. TOTAL RETURN is the percentage change
between the net asset value of one Fund share at the beginning of a period and
the net asset value of such share at the end of the period assuming reinvestment
of all dividends at the net asset value on the reinvestment date. Dividends are
comprised of realized capital gains and investment income. CUMULATIVE TOTAL
RETURN reflects the Fund's performance over a stated period of time. No
adjustments were made for income taxes. All such quotations are based upon
historical data and should not be considered a representation of the Fund's
future performance. The investment return and principal value of an investment
will fluctuate, so that an investor's shares when redeemed may be worth more or
less than their original cost. Performance is a function of portfolio management
in selecting the type and quality of portfolio securities and is affected by
operation expenses.
4
<PAGE>
8
SUMMARY OF ANNUAL INVESTMENT RESULTS SINCE INCEPTION
(assuming reinvestment of dividends)
<TABLE>
<CAPTION>
Cumu-
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981* lative
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31.0% -16.5% 2.0% 24.7% 15.6% -6.7% 23.8% 29.4% -14.3% 20.8% 20.0% -2.6% 34.3% 34.1% 7.6% 464.92%
</TABLE>
*June 10, 1981-December 31, 1981
Comparative performance information may be used from time to time in
advertising or marketing of the Fund's shares, including data from major market
indices such as the Dow Jones Industrial Average and Standard & Poor's 500 Stock
Index. Such comparative performance information will be stated in the same terms
in which the performance of such indices are stated. Further information about
the Fund's performance is contained in the Annual Report.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to achieve capital appreciation
by investing in equities. Toward this end, the Fund invests in common stocks or
securities convertible into common stock. The Fund will invest in major
corporations whose shares are listed on the New York Stock Exchange, the
American Stock Exchange or the Over-the-Counter market. Although the Fund has
flexibility to invest in a broad range of corporations, it will not purchase the
securities of any corporation with a record of less than three years' continuous
operations (including that of predecessors) if such investment would exceed 5%
of the Fund's total assets at time of purchase. Up to 20% of the Fund's total
assets may be invested in non-U.S. securities. There can be no assurance that
the Fund's objective will be achieved.
Current income is not the Fund's investment objective; however, when,
in the Investment Advisor's opinion, market conditions warrant a temporary
defensive position, there is no restriction on the Fund's investment in debt
instruments, including tax-exempt bonds. Similarly, there may be occasions when
the Fund will have a position of its portfolio invested in cash or cash
equivalents.
The Fund may, from time to time, borrow money to the maximum extent
permitted by the Investment Company Act from banks at prevailing interest rates
and invest the funds in additional securities. The Fund's borrowings are limited
so that immediately after such borrowings the value of assets (including
borrowings) less liabilities (not including borrowings) is at least three times
the amount of the borrowings. Should the Fund, for any reason, have borrowings
that do not meet the above test then, within three business days, the Fund must
reduce such borrowings so as to meet the necessary test. Under such a
circumstance, the Fund may have to liquidate portfolio securities at a time when
it is disadvantageous to do so. Gains made with additional funds borrowed will
generally cause the net asset value of the Fund's shares to rise faster than
could be the case without borrowings. Conversely, if investment results fail to
cover the cost of borrowings, the net asset value of the Fund could decrease
faster than if there had been no borrowings.
The Fund may lend its portfolio securities to brokers, dealers and
other institutional investors in an amount not to exceed 10% of its total
assets.
The Fund, subject to certain restrictions, may invest in other
investment companies. To the extent that it does, duplicate fees may be
incurred.
The Fund will not make short sales of securities or maintain short
positions unless at all times when a short position is open the Fund owns an
equal amount of such securities or securities convertible into or exchangeable,
without payment of
5
<PAGE>
9
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short. This is a technique known as selling short
"against the box". Such a transaction serves to defer a gain or loss for Federal
income tax purposes.
Up to 20% of the Fund's total assets may be invested in non-U.S.
securities. There are certain risks involved in investing in non-U.S.
securities, including those resulting from fluctuations in currency exchange
rates, revaluation of currencies, future political and economic developments and
the possible imposition of currency exchange regulations or other foreign
governmental laws or restrictions, reduced availability of public information
concerning issuers, and the fact that non-U.S. companies are not generally
subject to uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements comparable to those applicable to
domestic companies. Moreover, securities of many non-U.S. companies may be less
liquid and their prices more volatile than those of securities of comparable
domestic companies. In addition, with respect to certain foreign countries,
there is the possibility of expropriation, confiscatory taxation and limitations
on the use or removal of funds or other assets of the Fund.
The Fund may invest in all types of debt securities, in any proportion,
including debt obligations of the U.S. Treasury, its agencies and
instrumentalities, bonds, notes, mortgage securities, government and government
agency obligations, zero coupon securities, convertible securities, and
repurchase agreements. The Fund may invest in investment-grade corporate debt
securities which are considered to be those rated Baa-3 or higher by Moody's
Investors Service, Inc. or BBB- or higher by Standard & Poor's Corporation.
Securities rated Baa-3 and BBB- are considered to have speculative
characteristics. The Fund will not invest in securities judged by the Advisor to
be of poor quality, although it may invest in unrated securities if the Advisor
determines that such securities present attractive investment opportunities and
are of comparable quality to the other debt securities in which the Fund may
invest.
The Fund has the right to modify the investment policies described
above without shareholder approval; however, the Fund does not presently
contemplate making any such modifications.
The Fund has adopted the following restrictions which may not be
changed without shareholder approval:
(1) with respect to 50% of its assets, it will not at the time of
purchase invest more than 5% of its total assets, at market
value, in the securities of any one issuer (except the securities
of the United States Government); and
(2) with respect to the other 50% of its assets, it will not invest
at the time of purchase more than 25% of the market value of its
total assets in any single issuer.
These two restrictions, hypothetically, could give rise to a portfolio with as
few as twelve issues.
PURCHASE OF SHARES
The minimum initial investment by a shareholder is $5,000, including
IRA's and Keogh's. There is no minimum for additional investments. The Fund
reserves the right, in its sole discretion, to reject any subscription. No share
certificates will be issued unless requested in writing. Subscriptions for
shares are subject to acceptance by the Fund and are not binding until accepted.
Purchase by Mail: Shares of the Fund may be purchased by sending a
completed Application (included with this Prospectus or obtainable from the
Fund) to Gintel Group, c/o Chase Global Funds Services Company, P.O. Box 2798,
Boston, MA 02208-2798, accompanied by a check payable to Gintel Group in payment
for the shares. Applications sent to the Fund will be forwarded to Chase Global
Funds Services Company and will not be effective until received by Chase Global
Funds Services Company. Special forms are required for IRA and Keogh
subscriptions and may be obtained by contacting the Fund. Chase Global Funds
Services Company will charge $25.00 for each check returned for insufficient
funds.
6
<PAGE>
10
Purchase by Exchange: Shares of the Fund may be exchanged for shares of
any other fund with which the Fund has an exchange arrangement. When opening an
account by exchange, the new account must be established with the same name(s),
address, and tax identification number as the other account and must meet that
fund's minimum initial investment. Purchase by exchange may be executed by
either mail or telephone but in every instance must comply with the purchase and
redemption procedures set forth in the Prospectus. Neither Chase Global Funds
Services Company nor the Fund will be liable for acting upon such instructions,
regardless of the authority or absence thereof of the person giving the
instructions, or for any loss, expense, or cost arising out of any exchange by
telephone, whether or not properly authorized and directed. An investor will
bear the risk of loss. The staff of the Securities and Exchange commission is
currently examining whether such responsibilities may be disclaimed. The
accuracy of telephone transactions should be verified immediately upon the
receipt of confirmation statement.
Purchase by Wire: Investors may purchase shares by wire by first
telephoning Chase Global Funds Services Company at 1-800-344-3092 for
instructions and wire control number and subsequently wiring Federal funds and
registration instructions to: Chase Manhattan Bank N.A., ABA #021000021, Gintel
Group, DDA No. 910-2-732980, for further credit to (Name of Fund), Account
Registration (including account name, number and wire control number).
Purchase by Automatic Investment: Investors may purchase shares on a
regular basis, (the first, the fifteenth, or the first and fifteenth of each
month), by automatically transferring a specified dollar amount ($100 minimum)
from their regular checking or NOW account to their specified Gintel Group
Account. Special forms are required for this automatic investment plan and may
be obtained by contacting the Fund.
Confirmed purchases will be done only at the discretion of the
Investment Advisor.
Purchase of shares of the Fund may also be made through registered
securities dealers who have entered into selected dealer agreements with the
Distributor. A dealer who agrees to process an order on behalf of an investor
may charge the investor a fee for this service.
The offering price of each Fund share is the net asset value per share
next computed after the subscriber's application is received by Chase Global
Funds Services Company. The net asset value per share is determined by dividing
the market value of the Fund's securities as of the close of trading plus any
cash or other assets (including dividends and accrued interest) less all
liabilities (including accrued expenses) by the number of the Fund's shares
outstanding. The Fund will determine net asset value of its shares on each "Fund
Business Day", which is any day the New York Stock Exchange is open for business
exclusive of national holidays.
All ordinary income dividends and capital gains distributions are
automatically reinvested at net asset value unless the Chase Global Funds
Services Company receives written notice from a shareholder at least 30 days
prior to the record date requesting that the distributions and dividends be
distributed to the investor in cash.
REDEMPTION OF SHARES
Upon receipt by Chase Global Funds Services Company of a request in
proper form, the Fund will redeem shares at its next determined net asset value.
Redemption of shares of the Fund or payments therefore may be suspended at such
times (a) when the New York Stock Exchange is closed, (b) when trading on the
New York Stock Exchange is restricted, (c) when an emergency exists which makes
it impractical for the Fund to either dispose of securities or make a fair
determination of net asset value. There is no assurance that the net asset value
received upon redemption will be greater than that paid by a shareholder upon
purchase.
Redemption by Mail: Shares may be redeemed by sending a written
redemption request to Gintel Group, c/o Chase Global Funds Services Company,
P.O. Box 2798, Boston, MA 02208-2798. Any written request sent to the Fund will
be forwarded to Chase Global Funds Services Company and the effective date of
the redemption request will be when the request is received in proper form by
Chase Global Funds Services Company. The redemption value of each Fund share is
the net asset value per share next computed after the redemption request is
received in proper form. Where share certificates have been
7
<PAGE>
11
issued, a shareholder must endorse the certificates and include them in the
redemption request."Proper form" means that the request for redemption must
include the following:
1. A letter of instruction specifying the Fund name, the account
number, and the number of shares or the dollar amount to be redeemed and signed
by all registered owners exactly as their names appear on the account.
2. Signatures must be guaranteed by an eligible guarantor institution
as described in Rule 17Ad-15 under the Securities and Exchange Act of 1934. Such
institutions include banks, brokers, securities dealers, credit unions,
securities exchanges, clearing agencies and savings associations. The eligible
guarantor institution must be a participant in a recognized signature guarantee
program such as the STAMP program of the Securities Transfer Association.
Eligible guarantor institutions previously approved by Chase Global Funds
Services Company (commercial banks and members of domestic stock exchanges) will
continue to be approved. Eligible guarantor institutions not previously approved
by Chase Global Funds Services Company and not yet members of a recognized
signature guarantee program, must make application to that company. For complete
information or a copy of Chase Global Funds Services Company's signature
guarantee Standards, Procedures and Guidelines, please contact the Transfer
Agent at (800) 344-3092. A notary public is not an acceptable guarantor.
3. Other supporting legal documents, if required, in the case of
estates, trusts, guardianships, corporations, pension and profit sharing plans
and other organizations. Shareholders should contact Chase Global Funds Services
Company, (800) 344-3092, to obtain further information on the specific
documentation required.
Payment will be made for redeemed shares as soon as practicable, but in
no event later than three business days after proper receipt of redemption
notification. Payment will be made by check, unless a shareholder arranges for
the proceeds of redemption requests to be sent by Federal fund wire to a
designated bank account, in which case a wire charge (currently $8.00 per wire)
will be deducted from the account. Shareholders should contact Chase Global
Funds Services Company, (800) 344-3092, to obtain further information on this
service and the related charges.
Redemption by Telephone: Shareholders who authorize telephone
redemptions in the Application may redeem shares by telephone instructions to
Chase Global Funds Services Company which will wire the proceeds of redemptions
to the bank and bank account number specified in the Application or mail the
proceeds to the address of record, except that telephone redemptions of less
than $1000 will be mailed. Redemptions by wire will be charged a wire fee
(currently $8.00 per wire) which will be deducted from the account . Any change
in the bank account specified in the Application must be made in writing with a
signature guarantee as described above for redemptions by mail. Neither Chase
Global Funds Services Company nor the Fund will be liable for acting upon such
instructions, regardless of the authority or absence thereof of the person
giving the instructions, or for any loss, expense, or cost arising out of any
redemptions by telephone, whether or not properly authorized and directed.
Automatic Redemptions: A shareholder who owns shares of the Fund with a
value of $10,000 or more may establish a Systematic Withdrawal Plan. The
Shareholder may request a declining balance withdrawal, a fixed dollar
withdrawal, a fixed share withdrawal, or a fixed percentage withdrawal (based on
the current value of the account) on a monthly, quarterly, semi-annual or annual
basis. When a shareholder reaches age 59-1/2 and begins to receive distributions
from an IRA or other retirement plan invested in the Fund, the shareholder can
arrange to have a regular monthly or quarterly redemptions made under Systematic
Withdrawal Plan. In this case it is not necessary for the account value to be
$10,000 or more. Further information on establishing a Systematic Withdrawal
Plan may be obtained by calling the Fund.
Sales of shares of the Fund may also be made through registered
securities dealers who have entered into selected dealer agreements with the
Distributor. A dealer who agrees to process an order on behalf of an investor
may charge the investor a fee for this service.
8
<PAGE>
12
With the exception of IRA or Keogh accounts, the Fund reserves the
right to close accounts that have dropped below $5,000 in value for a period of
three months or longer other than as a result of a decline in the net asset
value per share. Shareholders are notified at least 60 days prior to any
proposed redemption and invited to add to their account if they wish to continue
as a shareholder of the Fund; however the Fund does not presently contemplate
making such redemptions.
Confirmed redemptions will be done only at the discretion of the
Investment Advisor.
MANAGEMENT
Responsibility for management of the Fund is vested in the Board of
Trustees. The Board approves all significant agreements between the Fund and all
persons or companies that furnish services to the Fund, including the Investment
Advisory Agreement and Administrtive Services Agreement. The trustees elect the
officers of the Fund to supervise actively the day to day operations of the
Fund. The trustees and officers of the Fund and their principal occupations for
the past five years are listed below. Unless otherwise indicated the address of
each trustee and executive officer is 6 Greenwich Office Park, Greenwich, CT
06831:
<TABLE>
<CAPTION>
NAME AND OFFICE PRINCIPAL OCCUPATION
- --------------- ---------------------
<S> <C>
Robert Gintel,* Chairman and Chief Executive Officer of
Chairman of the Board, Gintel Equity Management, Inc. since 1971;
Chief Executive Officer Senior Partner of Gintel & Co. Limited
and Trustee Partnership, a member firm of the New York
Stock Exchange, Inc. and an associate
member firm of the American Stock
Exchange, Inc. since June 1969; Chairman
and Director, Oneita Industries (textile &
apparel manufacturer); Vice Chairman and
Director of XTRA Corporation (intermodal
equipment leasing); Chairman of the Board,
Chief Executive Officer and trustee of the
Fund since November 1980, and Gintel ERISA
Fund since September 1981.
Thomas H. Lenagh, Financial Consultant; formerly Chairman
Trustee, and Trustee, Chief Executive Officer of
1 Brookside Drive Greiner Engineering Co. (consulting
Westport, CT 06880 engineers); financial advisor to various
institutions since January 1980; special
advisor to the Aspen Institute (research
institute) from September 1979 until
September 1980 and Financial Vice
President of the Aspen Institute from
September 1978 until September 1979;
previously, Treasurer and financial
advisor to the Ford Foundation and
director of Cluster B registered
investment companies managed by Merrill
Lynch Asset Management, Inc.; and director
of Adams Express Co. (closed-end
investment company), USLife Corp., ICN
Biomedics, Inc., SCI Systems, Inc.
(computer peripherals), Irvine Sensors
Corp. (infrared sensing device
manufacturer), CML Inc., (specialty
retailing), Clemente Global (investment
company), and Rexhall, Inc. (motor home
manufacturer); trustee of the Fund since
December 1980 and Gintel ERISA Fund since
September 1981.
Francis J. Palamara, Business Consultant; previously Director
Trustee, and Executive Vice President of ARA
3110 E. Maryland Ave. Services, Inc. (provides various services
Phoenix, AZ 85064 for industry, institutions and government;
formerly director and Executive Vice
President of the Pittston Company (holding
company for coal and other interests);
from 1972 until 1978, Executive Vice
President and Chief Operating Officer of
the New York Stock Exchange, Inc.;
director of XTRA Corporation (intermodal
equipment leasing); Glenmede Fund (a
regulated investment company); and Central
Tractor Farm & Country (specialty
retailing); trustee of the Fund since
January 1981, Gintel ERISA Fund since
September 1981.
</TABLE>
9
<PAGE>
13
<TABLE>
<CAPTION>
NAME AND OFFICE PRINCIPAL OCCUPATION
- --------------- --------------------
<S> <C>
Russel R. Taylor, Associate Professor of Management, College of New Rochelle, since 1977; founder
Trustee, and Director of Russel Taylor, Inc. since 1963; trustee of the Fund and Gintel
31 Indian Point Lane ERISA Fund since December 1985.
Riverside, CT 06878
Stephen G. Stavrides,* Director, President and Treasurer of Gintel Equity Management, Inc.; General
Trustee, Chief Operating Partner of Gintel & Co. Limited Partnership; President and Treasurer of the Fund
Officer, President and Treasurer and Gintel ERISA Fund; previously Corporate Administrator of Poten & Partners,
Inc. (an energy and ocean transportation brokerage and consulting firm); from
1972-1980; Vice President of various groups in the D. K. Ludwig organization;
and Director of Home Savings in Houston from 1978-1980. Trustee of the Fund, and
Gintel ERISA Fund since December 1991.
Donna K. Grippe Secretary and Assistant Treasurer of the Fund and Gintel ERISA
Fund; Secretary and Assistant previously, Manager of the Fund Accounting for
American Investors Fund, Inc., Treasurer American Investors Income Fund, Inc.,
and American Investors Money Market Fund, Inc.
</TABLE>
On February 29, 1996 Robert M. Gintel and his family, trustees of the
Fund and employees of Gintel Equity Management, Inc. and Gintel & Co. owned
directly or beneficially 2,041,636 shares with a market value of $32,666,174,
representing 33.1% of the Fund's outstanding shares.
- --------
* Interested person as defined in the 1940 Act.
TAX-SHELTERED RETIREMENT PLANS
The Fund makes available Keogh and IRA Plans, including IRA's set up
under a Simplified Employee Pension Plan ("SEP-IRA's") and IRA "Rollover
Accounts". Investors who wish to purchase shares in conjunction with any such
tax-sheltered retirement plan may request from the Fund forms for adoption of
such plans. All fees charged by the Custodian are described in the appropriate
form. The investor should read the plan and related agreements for further
details as to eligibility, service fees and the summary of certain Federal
income tax implications. Further, each investor should consult a tax advisor
regarding the tax consequences of adopting such plans, since the Fund is not and
should not be relied upon to provide tax advice for each investor.
INVESTMENT ADVISOR AND INVESTMENT ADVISORY AGREEMENT
Gintel Equity Management, Inc., 6 Greenwich Office Park, Greenwich, CT
06831 is the Investment Advisor to the Fund pursuant to the investment advisory
agreement (the "Agreement"). The Agreement provides that the Investment Advisor
identify and analyze possible investments for the Fund and determine the amount,
timing, and form of such investments. The Investment Advisor has the
responsibility of monitoring and reviewing the Fund's portfolio, on a regular
basis, and recommending the ultimate disposition of such investments. It is the
Investment Advisor's responsibility to cause the purchase and sale of securities
in the Fund's portfolio, subject at all times to the policies set forth by the
Board of Trustees.
Robert M. Gintel owns all the outstanding shares of the Investment
Advisor. Since 1971, the Investment Advisor has been managing discretionary
investment accounts for individual investors, corporate pension funds and profit
sharing plans, charitable foundations, universities and others.
10
<PAGE>
14
The Investment Advisor receives a fee from the Fund, payable at the
beginning of each quarter, for the performance of its services at an annual rate
of 1% (0.25% quarterly) of the average daily net assets of the Fund during the
preceding quarter. The fee is accrued daily for the purposes of determining the
offering and redemption price of the Fund's shares. The advisory fee is higher
than that paid by most investment companies; however, many of those investment
companies are of different size or have different investment objectives from the
Fund. For the fiscal year ended December 31, 1995 the Fund paid fees to the
Investment Advisor of $928,954.
The following are biographies of key personnel who are ultimately
responsible for investment decisions:
Robert M. Gintel has spent his entire business career in the investment
industry with more than 40 years of experience as a professional investor. Mr.
Gintel is Chairman and Chief Executive Officer of Gintel Equity Management, Inc.
He is also a Senior Partner and founder of Gintel & Co., a member of the New
York Stock Exchange and associate member of the American Stock Exchange, and
Chairman of the Board and Chief Executive Officer of Gintel Fund and Gintel
ERISA Fund. He holds a B.A. degree from Columbia College and an M.B.A. from the
Harvard Business School. Mr. Gintel has served on the Board of Directors of
several New York Stock Exchange listed corporations and is currently Chairman of
the Board of Oneita Industries and Vice Chairman of the Board of XTRA
Corporation. Mr. Gintel has lectured and written articles on investments and has
appeared on Wall Street Week as well as other television and radio programs.
Cecil A. Godman, III joined the Gintel organization in 1985 and became
Chief Investment Officer in 1991. He also serves as a director of Gintel Equity
Management, Inc. and is a General Partner of Gintel & Co. Before joining Gintel
Equity Management Inc. Mr. Godman spent two years as a securities analyst with
First Tennessee Investment Management, Inc., a $1.8 billion asset management
subsidiary of First Tennessee National Corporation, where he was a member of the
Investment Policy Committee and the Equity Selection Group. Prior to that Mr.
Godman had been a commercial loan officer in the small business division at
First Tennessee Bank. Mr. Godman has been interviewed by Barron's and has been a
featured speaker at the Donoghue's Mutual Fund Conferences. He received his B.A.
in Business Administration and Economics from Rhodes College in 1982.
Edward F. Carroll joined Gintel Equity Management, Inc. in 1983 and is
a General Partner of Gintel & Co. Previously, Mr. Carroll had his own consulting
firm specializing in global energy issues and was on the staff of the Ford
Foundation, where he was directly responsible for all energy-related
investments. Mr. Carroll's 35-year career includes experience as an analyst with
the Wall Street firms, Halle & Steiglitz, Henry Hentz & Company, and E.F.
Hutton. He holds a B.G.S. degree from the University of Connecticut.
The Code of Ethics of the Advisor and the Fund prohibits all affiliated
personnel from engaging in personal investment activities which compete with or
attempt to take advantage of the Fund's planned portfolio transactions. The
objective of the Code of Ethics of both the Advisor and the Fund is that their
operations be carried out for the exclusive benefit of the Fund's shareholders.
Both organizations maintain careful monitoring of compliance with the Code of
Ethics.
ADMINISTRATIVE SERVICES AGREEMENT
The Administrative Services Agreement dated August 24, 1992, provides
that in consideration for the services provided by the Distributor and the
payment by the Distributor of substantially all of the Fund's expenses
previously paid by the Fund directly, including but not limited to brokerage
commissions, charges for custody, fund accounting, transfer
agency,administration, registration, printing, legal counsel, independent
accountants, shareholder and trustee meeting expenses and insurance (but
excluding the Investment Advisor's fees, the fees paid to the non-interested
Trustees, certain transaction costs, interest, taxes and extraordinary
expenses), the Distributor will receive a fee payable at the beginning of each
quarter based on average daily net assets during the preceding quarter, at an
annual rate of 1.25% of the first $50 million of the average daily net assets of
the Fund, 1.125% of the next $50 million of average daily net assets and 1.0% of
the average daily net assets in excess of $100 million. The Distributor will pay
for any distribution-related expenses out of its own sources, including
legitimate profits from the administrative services fee received from the Fund.
For the fiscal year ended December 31, 1995, the Fund paid fees to the
Distributor of $1,107,572.
11
<PAGE>
15
BROKERAGE ALLOCATION
Subject to the supervision of the Board of Trustees, decisions to buy
and sell securities are made by officers of the Fund with the assistance of the
Investment Advisor. The Board of Trustees has authorized the Fund to use Gintel
& Co. Limited Partnership ("Gintel & Co."), on an agency basis, to supervise and
to effect a substantial amount of the portfolio transactions which are executed
on the New York or American Stock Exchanges, Regional Exchanges where relevant,
or which are traded in the Over-the-Counter market. Under the Administrative
Services Agreement, however, the Distributor and not the Fund pays all brokerage
commissions on securities transactions.
TAX MATTERS
The Fund intends to qualify as a regulated investment company by
satisfying the requirements under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), including the requirements with respect to
diversification of assets, distribution of income and sources of income. It is
the Fund's policy to distribute to shareholders all of their investment income
(net of expenses) and any capital gains (net of capital losses) in accordance
with the timing requirements imposed by the Code, so that the Fund will satisfy
the distribution requirement of Subchapter M and not be subject to Federal
income taxes or the 4% excise tax.
The Fund is organized as a Massachusetts business trust. So long as it
qualifies as a regulated investment company for Federal income tax purposes, it
will not be subject to any income tax in the Commonwealth of Massachusetts.
Distributions by the Fund of its net investment income and the excess,
if any, of its net short-term capital gain over its net long-term capital loss
are taxable to shareholders as ordinary income. These distributions are treated
as dividends for Federal income tax purposes, but in any year only a portion
thereof (which cannot exceed the aggregate amount of qualifying dividends from
domestic corporations received by the Fund during the year) may qualify for the
70% dividends-received deduction for corporate shareholders. Because the Fund's
investment income may include interest and dividends from foreign corporations
and the Fund may have short-term capital gains, substantially less than 100% of
the ordinary income dividends paid by the Fund may qualify for the
dividends-received deduction. Distributions by the Fund of the excess, if any,
of its net long-term capital gain over its net short-term capital loss are
designated as capital gain dividends and are taxable to shareholders as
long-term capital gains, regardless of the length of time the shareholder held
his shares.
Distributions to shareholders will be treated in the same manner for
Federal income tax purposes whether received in cash or reinvested in additional
shares of the Fund. In general, distributions by the Fund are taken into account
by the shareholders in the year in which they are made. However, certain
distributions made during January will be treated as having been paid by the
Fund and received by the shareholders on December 31 of the preceding year. A
statement setting forth the Federal income tax status of all distributions made
(or deemed made) during the year will be sent to shareholders promptly after the
end of each year. Shareholders purchasing shares of the Fund just prior to the
ex-dividend date will be taxed on the entire amount of the dividend received,
even though the net asset value per share on the date of such purchase reflected
the amount of such dividend.
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
Any loss realized upon a taxable disposition of shares within six months from
the date of their purchase will be treated as long-term capital loss to the
extent of any capital gain dividends received on such shares. All or a portion
of any loss realized upon a taxable disposition of shares of the Fund may be
disallowed if other shares of the Fund are purchased within thirty days before
or after such disposition.
12
<PAGE>
16
Under the back-up withholding rules of the Code, certain shareholders
may be subject to 31% withholding of Federal income tax on ordinary income
dividends, capital gain dividends and redemption payments made by the Fund. In
order to avoid this back-up withholding, a shareholder must provide the Fund
with a correct taxpayer identification number (which for an individual is
usually his Social Security number) and certify that it is a corporation or
otherwise exempt from or not subject to back-up withholding. The new account
application included with this Prospectus provides for shareholder compliance
with these certification requirements.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, a prospective shareholder should
also review the more detailed discussion of federal income tax consider- ations
relevant to the Fund that is contained in the Statement of Additional
Information for the Fund. In addition, each prospective shareholder should
consult with his own tax adviser as to the tax consequences of investments in
the Fund, including application of state and local taxes which may differ from
the Federal income tax consequences described above.
ORGANIZATION AND DESCRIPTION OF SHARES OF THE FUND
The Fund is an open-end, non-diversified management investment company.
On September 6, 1986, it reorganized as a Massachusetts business trust under the
laws of the Commonwealth of Massachusetts and filed its Declaration of Trust
filed July 29, 1986. Because the Fund is "non-diversified", more than 5% of the
Fund's assets may be invested in the equity securities of any single issuer,
which may make the value of the Fund's shares more susceptible to certain risks
than shares of a diversified mutual fund.
The Trustees are permitted to issue an unlimited number of shares of
beneficial interest in the Fund in an unlimited number of series of shares. Each
share has one vote and shares equally in dividends and distributions when and if
declared by the Fund and in the Fund's net assets upon liquidation. All shares,
when issued, are fully paid and nonassessable. There are no preemptive,
conversion or exchange rights. Shares of the Fund do not have cumulative voting
rights and, as such, holders of at least 50% of the shares voting for trustees
can elect all trustees and the remaining shareholders would not be able to elect
any trustees. The Board of Trustees may classify or reclassify any unissued
shares of the Fund into shares of any series by setting or changing in any one
or more respects, from time to time, prior to the issuance of such shares, the
preference, conversion or other rights, voting powers, restrictions, limitations
as to dividends, or qualifications of such shares. Any such classification or
reclassification will comply with the provisions of the 1940 Act.
There will not normally be annual shareholder's meetings. The Fund,
however, at its discretion, may continue to hold meetings of its shareholders to
discuss portfolio management and shareholder relations but such meetings will
not be subject to the rules and regulations of the securities laws with respect
to proxy solicitation. The Trustees will promptly call a shareholder's meeting
to remove a Trustee(s) when requested to do so in writing by record holders of
not less than 10% of the Fund's outstanding shares.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT
The transfer agent, dividend paying agent and custodian for all cash
and securities of the Fund is Chase Manhattan Bank, N.A., 770 Broadway, New
York, New York 10003.
COUNSEL AND AUDITORS
The firm of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel is counsel
for the Fund. Richard A. Eisner & Company, LLP, has been appointed independent
auditors for the Fund. These firms provide similar services to the Investment
Advisor and Gintel & Co.
13
<PAGE>
17
OTHER INFORMATION
This Prospectus omits certain information contained in the registration
statement filed with the Securities and Exchange Commission. Copies of the
registration statement, including items omitted herein, may be obtained from the
Commission by paying the charges prescribed under its rules and regulations. The
Statement of Additional Information for the Fund included in such registration
statement may be obtained without charge from the Fund.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and information
or representations not herein contained, if given or made, must not be relied
upon as having been authorized by the Fund. This Prospectus does not constitute
an offer or solicitation in any jurisdiction in which such offering may not
lawfully be made.
[GRAPHIC OMITTED]
GINTEL FUND
Average Annual Rates of Return
<TABLE>
<S> <C>
One(1) Year 31.0%
Five (5) YEars 11.4%
Ten (10) Years 11.0%
</TABLE>
Investment results are net of expenses, with dividends and capital gains
reinvested. The S&P 500 is a broad market-weighted average dominated by
blue-chip stocks.
Past results offer no assurance as to future performance. The investment return
and principal value of an investment will fluctuate, so that an investor's
shares, when redeemed, may be worth more or less than their original cost. The
Fund's prospectus contains more and should be read carefully.
14
<PAGE>
18
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expenses 2
Condensed Financial Information 3
The Fund 4
Investment Performance 4
Investment Objective and Policies 5
Purchase of Shares 6
Redemption of Shares 7
Management 9
Tax-Sheltered Retirement Plans 10
Investment Advisor
and Investment Advisory Agreement 10
Administrative Services Agreement 11
Brokerage Allocation 12
Tax Matters 12
Organization and Description of Shares
of the Fund 13
Custodian, Transfer Agent
and Dividend Paying Agent 13
Counsel and Auditors 13
Other Information 14
</TABLE>
INVESTMENT ADVISOR
Gintel Equity Management, Inc.
6 Greenwich Office Park
Greenwich, CT 06831
SHAREHOLDER SERVICING AGENT
Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
- -------------------------------------------------------------------------------
GINTEL FUND
PROSPECTUS
MAY 1, 1996
GINTEL GROUP
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
TOLL FREE
800 344-3092
- -------------------------------------------------------------------------------
<PAGE>
PART B
Related Statement of Additional Information
GINTEL FUND
This Related Statement of Additional Information is not a prospectus
but should be read in conjunction with the Combined Prospectus/Proxy Statement
dated August 30, 1996. Included herein are the Statements of Additional
Information of the Gintel ERISA Fund and the Gintel Fund dated May 1, 1996,
which include audited financial statements of the Gintel ERISA Fund and the
Gintel Fund for the period ended December 31, 1995. Also included are the
unaudited financial statements of the Gintel Fund for the period ended June 30,
1996.
The pro forma combined statement of assets and liabilities reflects the
financial position of Gintel Fund at June 30, 1996 as though the Reorganization
occurred as of that date. The pro forma combined statement of operations
reflects the results of operations of the Gintel Fund and Gintel ERISA Fund for
the period ended June 30, 1996 as though the Reorganization occurred at the
beginning of the period presented.
<PAGE>
18
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
GINTEL ERISA FUND
(FOR TAX-EXEMPT INVESTORS)
Gintel ERISA Fund (the "Fund") is an open-end, non-diversified
management investment company whose primary investment objective is to maximize
total investment return through a combination of long-term appreciation and
investment income. The Fund also invests for short-term capital gains. The
Fund's shares are offered exclusively to pension plans, trusts or IRA and Koegh
plans which qualify under Section 401, 403(b) or 408 of the Internal Revenue
Code and to educational, religious and charitable institutions, foundations and
other organizations which are exempt from Federal income taxation under Section
501 of the Internal Revenue Code. The Fund offers and redeems its shares at net
asset value. Investors pay no sales charge or commissions to purchase Fund
shares. The minimum initial purchase is $10,000 except for IRA and Keogh
accounts where the minimum initial purchase is $2,000. Minimum individual
initial investments may be waived for omnibus arrangements with certain broker
dealers. There is no minimum for additional investments.
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Fund's current Prospectus, a copy of which may
be obtained by writing Gintel ERISA Fund's Investment Advisor at 6 Greenwich
Office Park, Greenwich, CT 06831 or calling (203) 622-6400.
This Statement of Additional Information related to the Fund's
Prospectus dated May 1, 1996.
TABLE OF CONTENTS
PAGE
----
Investment Objective and Policy............................. 2
Investment Restrictions..................................... 2
Management.................................................. 3
Investment Advisor and Investment Advisory Agreement........ 3
Administrator and Administrative Services Agreement......... 4
Portfolio Transactions and Brokerage........................ 5
Allocation of Investments................................... 6
Computation of Net Asset Value.............................. 6
Tax Matters................................................. 7
Performance Information..................................... 9
Shareholder Reports......................................... 9
Report of Independent Certified Public Accountants.......... F-1
Financial Statements........................................ F-2
1
<PAGE>
19
INVESTMENT OBJECTIVE AND POLICY
The following information supplements, and should be read in
conjunction with the section in the Fund's prospectus entitled "Investment
Objective and Policy".
As described in the Fund's Prospectus, the Fund invests in common
stocks or securities convertible into common stock, as well as fixed income
securities or debt instruments. The Fund invests in major corporations whose
shares are listed on the New York Stock Exchange or the American Stock Exchange.
It may also invest in non-speculative securities traded in the Over the Counter
market, provided that such investments do not exceed 25% of the Fund's total
assets at time of purchase. Although the Fund will have flexibility to invest in
a broad range of corporations, it will not purchase the securities of any
corporation with a record of less than three years continuous operations,
(including that of predecessors) if such investment would exceed 5% of the
Fund's total assets at time of purchase.
The Fund may lend its portfolio securities to brokers, dealers and
other institutional investors in an amount not to exceed 10% of the Fund's total
assets under circumstances where the borrower of such securities provides cash
or cash equivalents as collateral (such cash equivalents will be limited to
securities issued or guaranteed by the United States Government, its agencies or
instrumentalities) at all times in an amount at least equal to the value of the
borrowed securities, and the Fund will retain the right to obtain any dividend,
interest or other distribution on the securities and any increase in their
market value and reserves the right to terminate such arrangement at any time
(such right of termination may be exercised, among other reasons, to obtain the
return of the securities on loan for the purpose of voting on any matters
considered material by the Fund's management).
Unlike the investment objective of maximizing total investment return
and the investment restrictions set forth below (see "Investment Restrictions"),
which may not be changed without shareholder approval, the Fund has the right to
modify the investment policies described above without shareholder approval.
However, the Fund does not presently contemplate making any such modifications.
INVESTMENT RESTRICTIONS
The Fund is a non-diversified management investment company and
(1) with respect to 50% of its assets, the Fund will not at the time of
purchase invest more than 5% of its total assets, at market value, in the
securities of one issuer (except the securities of the United States
Government);
(2) with respect to the other 50% of its assets, the Fund will not
invest at the time of purchase more than 15% of the market value of its total
assets in any single issuer.
These two restrictions, hypothetically, could give rise to a portfolio
as few as fourteen issues.
In addition, the Fund will not:
(1) purchase more than 10% of the outstanding voting securities of any
issuer;
(2) invest more than 25% of its assets in any one industry;
(3) make loans of money or securities other than (a) through the
purchase of securities in accordance with the Fund's investment objectives, and
(b) by lending portfolio securities;
(4) buy or sell commodities of commodity futures contracts;
(5) underwrite securities;
(6) make short sales unless sales are against the box;
(7) borrow money, except that the Fund may borrow up to 5% of the value
of its total assets at the time of such borrowing from banks for temporary or
emergency purposes;
(8) invest for the purposes of exercising control or management;
(9) invest more than 5% of its total assets in the securities of other
investment companies or purchase more than 3% of any other investment company's
securities;
2
<PAGE>
20
(10) invest in restricted securities (securities that must be registered
under the Securities Act of 1933, as amended, before they may be offered and
sold to the public);
(11) participate in a joint investment account; or
(12) issue senior securities.
These investment restrictions may not be changed without approval by a
vote of a majority of the Fund's outstanding voting securities. Under the
Investment Company Act of 1940 (the "1940 Act"), such approval requires the
affirmative vote, at a meeting of shareholders, of the lesser of (a) more than
50% of the Fund's outstanding shares, or (b) at least 67% of shares present or
represented at the meeting, provided that the holders of more than 50% of the
Fund's outstanding shares are present in person or represented by proxy.
While not fundamental policies, the Fund undertakes to comply with the
following investment restrictions:
(a) investments which are not readily marketable are limited to 15% of
each Fund's average net assets at the time of purchase; included in this
category are "restricted" securities, and any other assets for which an active
and substantial market does not exist at the time of purchase or subsequent
valuation; restricted securities for purposes of this limitation do not include
securities eligible for resale pursuant to Rule 144A of the Securities Act of
1933 which have been determined to be liquid by the respective Fund's Board of
Directors based upon the trading markets of the securities;
(b) the Fund may not purchase securities on margin;
(c) investments in warrants, valued at the lower of cost or market, may
not exceed 5.0% of the value of the Fund's net assets; included in such amount,
but not to exceed 2.0% of the value of a Fund's net assets, may be warrants
which are not listed on the New York Stock Exchange or the American Stock
Exchange; and, warrants acquired by a Fund may be deemed to be without value;
(d) the Fund may not invest in oil, gas and other mineral leases
(excluding readily marketable securities of companies which invest in oil, gas
and other mineral leases); and
(e) the Fund will not purchase or sell real property (including limited
partnership interests, but excluding readily marketable interests in real estate
investment trusts or readily marketable securities of companies which invest in
real estate).
MANAGEMENT
Reference is made to the Fund's current prospectus for the names of the
trustees and executive officers of the Fund and their principal occupations for
the last five years. Interested trustees do not receive trustees fees. Each of
the other trustees receives an annual fee of $8,250 paid by the Fund plus
expenses for each meeting of the Board and shareholder meeting he attends. The
Chairman of the Audit Committee receives an additional annual fee of $1,250.
Set forth below is information regarding compensation paid the period
from January 1, 1995-December 31, 1995:
<TABLE>
<CAPTION>
Pension or Retirement Estimated Annual
Name & Position Total Compensation Benefits Accrued as Part Benefits Upon Total Compensation from
from Gintel ERISA Fund of Fund Expenses Retirement Gintel ERISA Fund & Gintel Fund
<S> <C> <C> <C> <C>
Robert M. Gintel
(Chairman & C.E.O.) - 0 - $ 0 $ 0 - 0 -
Thomas H. Lenagh (Trustee) $ 8,250 $ 0 $ 0 $ 16,500
Francis J. Palamara (Trustee
& Chairman of Audit
Committee) $ 9,500 $ 0 $ 0 $ 19,000
Stephen G. Stavrides
(Trustee & President) - 0 - $ 0 $ 0 - 0 -
Russel R. Taylor (Trustee) $ 8,250 $ 0 $ 0 $ 16,500
</TABLE>
As of February 29, 1996, trustees and officers as a group beneficially
owned 126,422 shares of the Fund which represented 13.4% of the Fund's
outstanding shares.
Under the terms of the Massachusetts General Corporation Law, the Fund
may indemnify any person who was or is a trustee, officer or employee of the
Fund to the maximum extent permitted by the Massachusetts General Corporation
Law; provided, however, that any such indemnification (unless ordered by a
court) shall be made by the Fund only as authorized in the specific case upon a
determination that indemnification of such persons is proper in the
circumstances. Such determination shall be made (i) by the Board of Trustees, by
a majority vote of a quorum which consists of trustees who are neither
"interested persons" of the Fund as defined in Section 2(a)19) of the 1940 Act,
nor parties to the proceeding, or (ii) if the required quorum is not obtainable
or if a quorum of such trustees so directs by independent legal counsel in a
written opinion. No indemnification will be provided by the Fund to any trustee
or officer of the Fund for any liability to the Fund or its shareholders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of duty.
INVESTMENT ADVISOR AND INVESTMENT ADVISORY AGREEMENT
Gintel Equity Management, Inc., ("the Investment Advisor") 6 Greenwich
Office Park, Greenwich, Connecticut 06831 is the
3
<PAGE>
21
Investment Advisor to the Fund under an investment advisory agreement (the
"Agreement") entered into March 21, 1986. The Agreement is identical in all
material respects to the investment advisory agreement of the Fund's corporate
predecessor except for a change in the expense limitation and calculation of the
advisory fee based upon daily instead of weekly net asset value. The agreement
provides that the Investment Advisor identify and analyze possible investments
for the Fund, determine the amount and timing of such investments, and the form
of investment. The investment advisor has the responsibility of monitoring and
reviewing the Fund's portfolio, on a regular basis, to recommend the ultimate
disposition of such investments . It is the invest Advisor's responsibility to
cause the purchase and the ultimate disposition of such investments. It is the
Investment Advisor's responsibility to cause the purchase and sale of securities
in the Fund's portfolio, subject at all times to the policies set forth by the
Fund's Board of Trustees.
Robert M. Gintel owns all the outstanding shares of the Investment
Advisor. Since 1971, the Investment Advisor has been managing discretionary
investment accounts for individual investors, corporate pension funds and profit
sharing plans, charitable foundations, universities and others.
The Investment Advisor receives a fee, payable at the beginning of each
quarter, for the performance of its services at an annual rate of 1% (.25
quarterly) of the average daily net assets of the Fund during the preceding
quarter. The advisory fee is higher than that paid by most management investment
companies; however, many of those investment companies are of different size or
have different investment objectives from the Fund.
The Investment Advisor's fee will be reduced for any fiscal year by any
amount necessary to prevent Fund expenses and liabilities (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, determined by the
Fund or the Investment Advisor for the Fund, but inclusive of the Investment
Advisor's fee) from exceeding the most restrictive expense limitations imposed
by the securities laws or regulations of those states or jurisdictions in which
the Fund's share are registered or qualified for sale. Currently, the most
restrictive of such expense limitation would require the Investment Advisor to
reduce its fee so that ordinary expenses (excluding interest, taxes, brokerage
commissions and extraordinary expenses) for any fiscal year do not exceed 2.5%
of the first $30 million of the Fund's average daily net assets, plus 2.0% of
the next $70 million, plus 1.5% of the Fund's average daily net assets in excess
of $100 million. The amount of any such reduction shall be deducted from the
quarterly advisory fee, or if such amount exceeds the quarterly fee otherwise
payable, the Investment Advisor will repay such excess promptly.
Under the terms of the Agreement, the Fund pays all of its expenses,
including the costs incurred in connection with the maintenance of its
registration under the Securities Act of 1933, as amended, and the 1940 Act,
printing and mailing prospectuses to shareholders, transfer taxes on the sales
of portfolio securities, brokerage commissions, custodial and shareholder
reports, trustees' fees and expenses, and expenses of trustee and shareholder
meetings.
The Investment Advisor also serves as Investment Advisor to Gintel Fund,
a non-diversified investment company, and receives an annual fee, payable
quarterly, of 1% of the Gintel Fund's average daily net assets. The approximate
net assets of Gintel Fund as of March 31, 1995, were $101 million.
The Agreement may be terminated without penalty on 60 days' written
notice by a vote of the majority of the Fund's Board of Trustees or by the
Investment Advisor, or by holders of a majority of the Fund's outstanding
shares. The Agreement was initially approved by the Fund's Board of Trustees on
March 21, 1986, including the affirmative vote of a majority of the trustees who
were not parties to the Agreement nor interested persons of any such party, and
by the sole shareholder of the Fund on March 21, 1986. The Agreement was
continued by the Board of Trustees on February 23, 1992. The Agreement will
continue from year-to-year provided it is approved, at least annually, in the
manner stipulated in the 1940 Act. This requires that the Agreement and any
renewal be approved by a vote of the majority of the Fund's trustees who are not
parties thereto or interested persons of any such party, cast in person at a
meeting specifically called for the purpose of voting on such approval.
For the fiscal year ended December 31, 1995, the Fund paid fees to the
Investment Advisor of $290,547. For the fiscal year ended December 31, 1994, the
Fund paid fees to the Investment Advisor of $453,735. For the fiscal year ended
December 31, 1993, the Fund paid fees to the Investment Advisor of $549,258.
ADMINISTRATOR AND ADMINISTRATIVE SERVICES AGREEMENT
The Administrative Services Agreement provides that in consideration for
the services to be provided by the Distributor and the payment by the
Distributor of substantially all of the Fund's expenses currently paid by the
Fund directly (except the Investment Advisor's fees, the fees paid to the
non-interested Trustees, certain transaction costs and expenses, interest, taxes
and extraordinary expenses) the Distributor will receive a fee payable at the
beginning of each quarter based on average daily net assets during the preceding
quarter at an annual rate of 1.25% of the first $50 million of the average daily
net assets of the Fund, 1.125% of the next $50 million of average daily net
assets and 1.0% of the average daily net assets in excess of $100 million. The
Fund's administrative services fee is higher than that of most other funds which
have an administrator; however, most other funds bear certain of their own
expenses that will be borne by the Distributor on behalf of the Fund.
4
<PAGE>
22
The Administrative Services Agreement also permits the Distributor, at
its sole discretion, to use a portion of its fee, in an amount not to exceed
0.25% of the Fund's average daily net assets, to compensate itself as well as
certain other registered broker-dealers or financial institutions for certain
shareholder servicing activities. Therefore, the Administrative Services
Agreement provides that the Distributor, may, from time to time, pay a
shareholder servicing fee to certain registered brokers, including itself for
services provided in connection with the processing of orders for purchase or
redemption of the Fund's shares and certain other persons or entities for
furnishing services to specific shareholder accounts. In addition, the
Distributor may use income from sources other than its fee to compensate persons
for distribution and shareholder servicing or to pay for other
distribution-related expenses.
Pursuant to the terms of the Administrative Services Agreement, the
Distributor will furnish, without cost to the Fund, offices and office services
for the Fund, the services of the President, Secretary, Treasurer and one or
more Vice Presidents of the Fund, and such other personnel and facilities as are
required for the proper conduct of the Fund's affairs and to carry out their
obligations under such Agreement. In addition, the Distributor shall be
responsible for all brokerage commissions in connection with the purchase or
sale of the Fund's portfolio securities (excluding applicable transaction costs
such as Securities and Exchange Commission fees, exchange fees and certain sales
and transfer taxes which will be paid by the Fund). However, brokerage
commissions paid on trades executed through non-affiliated brokers will continue
to be paid by the Fund and credited against the administrative services fee to
be paid to the Distributor. The Distributor or the Fund's Investment Advisor
will pay for all expenses incurred regarding the printing and distribution of
prospectuses and any other promotional or sales literature used by the
Distributor or the Investment Advisor or furnished by the Distributor or the
Investment Advisor to purchasers in connection with the public offering of the
Fund's shares, the expenses of advertising in connection with such public
offering and legal expenses in connection with the foregoing.
Except as set forth below, the Distributor shall pay all expenses of
the Fund, including, without limitations: the charges and expenses of any
registrar, custodian, sub-custodian or depository appointed by the Fund for the
safe keeping of its cash, portfolio securities and other property, and any stock
transfer, dividend or accounting agent or agents appointed by the Fund; all fees
payable by the Fund to federal, state or other governmental agencies; the costs
and expenses of engraving or printing stock certificates, if any, representing
shares of the Fund; all costs and expenses in connection with the registration
and maintenance of registration of the Fund and its shares with the Securities
and Exchange Commission and various states and other jurisdictions (including
filing and legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders and to potential shareholders of the Fund; all expenses of
shareholder's meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; all expenses incident to the payment of
any dividend, distribution, withdrawal or redemption, whether in shares or in
cash; charges and expenses of any outside service used for pricing of the Fund's
shares; routine fees and expenses of legal counsel and of independent
accountants, in connection with any matter relating to the Fund; postage;
insurance premiums on property or personnel (including officers and trustees) of
the Fund which inure to its benefit; and all other charges and costs of the
Fund's operations unless otherwise explicitly assumed by the Fund. The Fund is
responsible for the payment of the following expenses not borne by the
Distributor; (i) the investment advisory fees paid to the Investment Advisor
pursuant to the terms of its Agreement with the Fund, (ii) the fees of the
trustees who are not "interested persons" of the Fund, as defined by the 1940
Act, and travel and related expenses of trustees for attendance at trustee and
shareholder meetings, (iii) certain transaction costs and expenses such as
regulatory agency fees and certain sales and transfer taxes, (iv) interest, (v)
taxes and (vi) extraordinary expenses, if any, including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto. Expenses which are attributable to the Fund are charged against
the income of the Fund in determining net income for dividend purposes.
The Investment Advisor and the Distributor have agreed to reduce their
aggregate fees for any fiscal year, or reimburse the Fund, to the extent
required, so that the amount of the ordinary expenses of the Fund paid or
incurred by the Fund does not exceed the expense limitations applicable to the
Fund imposed by the securities laws or regulations of those states or
jurisdictions in which the Fund's shares are registered or qualified for sale.
Expense reductions under state securities laws are unlikely because most of the
expense of the Fund can be expected to be borne by the Distributor.
For the fiscal year ended December 31, 1995, the Fund paid fees to the
Distributor of $363,186. For the fiscal year ended December 31, 1994, the Fund
paid fees to the Distributor of $571,060. For the nine month period from April
1, 1993 to December 31, 1993, the Fund paid fees to the distributor of $512,448.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Board of Trustees, decisions to buy
and sell securities for the Fund are made by the Investment Advisor. The Board
of Trustees has authorized the Fund to use Gintel & Co. on an agency basis, to
supervise and to effect a substantial amount of the portfolio transactions which
are executed on the New York or American Stock Exchanges, Regional Exchanges
where relevant, or which are traded in the Over-the Counter market. All such
transactions will be subject to the maximum discount which is presently extended
by Gintel & Co. to the other investment companies advised by the Investment
Advisor and other unaffiliated accounts of the Investment Advisor. Any profits
resulting from brokerage commissions earned by Gintel & Co. as a result of Fund
transactions will accrue to the benefit of the General Partners of Gintel & Co.,
several of whom are officers of the Investment Advisor. The Investment Advisory
Agreement does not provide for any reduction in the investment advisory fee as a
result of profits resulting from brokerage commissions effected through Gintel &
Co.
5
<PAGE>
23
The Board of Trustees has adopted certain procedures incorporating the
standard of Rule 17e-1 issued by the Securities and Exchange Commission under
the 1940 Act which requires that the commissions paid Gintel & Co. must be
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time".
The Rule and the Procedures also contain review requirements and require the
Investment Advisor to furnish reports to the trustees and to maintain records in
connection with such reviews.
The Investment Advisor is further authorized to allocate the orders
placed by it on behalf of the Fund to such unaffiliated brokers who also provide
research or statistical material, or other services to the Fund or the
Investment Advisor for the Fund's use. Such allocation shall be in such amounts
and proportions as the Investment Advisor shall determine and the Investment
Advisor will report on said allocations regularly to the Board of Trustees
indicating the unaffiliated brokers to whom such allocation have been made and
the basis therefore. In addition, the Investment Advisor may consider sale of
shares of the Fund and of Gintel Fund as a factor in the selection of
unaffiliated brokers to execute portfolio transactions for the Fund, subject to
the requirements of best execution.
In selecting a broker to execute each particular transaction, the
Investment Advisor will take the following into consideration: the best net
price available; the reliability, integrity and financial condition of the
broker; the size and difficulty in executing the order; and the value of the
expected contribution of the broker to the investment performance of the Fund on
a continuing basis. Accordingly, the cost of the brokerage commissions on a
transaction for the Fund may be greater than that available from other brokers
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies and procedures as the Board
of Trustees may determine, the Investment Advisor shall not be deemed to have
acted unlawfully or to have breached any duty solely by reason of its having
caused an unaffiliated broker that provides research services to the Investment
Advisor for the Fund's use to be paid an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker would have charged for effecting that transaction, if the Investment
Advisor determines in good faith that such amount of commission was reasonable
in relation to the value of the research service provided by such broker viewed
in terms of either that particular transaction or the Investment Advisor's
ongoing responsibilities with respect to the Fund.
For the fiscal years end December 31, 1995 and 1994, the Fund paid no
commissions, pursuant to the Administrative Services Agreement with the
Distributor under which all brokerage commissions are paid for by the
Distributor. For the first three months of the fiscal year ended December 31,
1993, the Fund paid commissions of $35,259 of which $28,759 (81.6%) was paid to
Gintel & Co.
ALLOCATION OF INVESTMENTS
The Investment Advisor has other advisory clients which include
investment companies and individuals, trusts, pension and profit sharing funds,
some of which have similar investment objectives to the Fund. As such, there
will be times when the Investment Advisor may recommend purchases and/or sales
of the same portfolio securities for the Fund and its other clients. In such
circumstances, it will be the policy of the Investment Advisor to allocate
purchases and sales among the Fund and its other clients in a manner which the
Investment Advisor deems equitable, taking into consideration such factors as
size of account, concentration of holdings, investment objectives, tax status,
cash availability, purchase cost, holding period and other pertinent factors
relative to each account. Simultaneous transactions could adversely affect the
ability of the Fund to obtain or dispose of the full amount of a security which
it seeks to purchase at which such security can be purchased or sold.
COMPUTATION OF NET ASSET VALUE
The Fund determines the net asset value of its shares at the close of
the New York Stock Exchange, currently 4 p.m., on each day that the Exchange is
open for business and on such other days as there is sufficient trading in the
Fund's securities to affect materially its net asset value per share except for
New Year's Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas. Subscriptions to purchase shares of the
Fund received prior to the close of trading on the New York Stock Exchange, are
confirmed at the net asset value determined that day or on the business day next
succeeding the date of receipt, if such orders are received after the close of
trading. The net asset value per share is determined by dividing the market
value of the Fund's securities as of the close of trading plus any cash or other
assets (including dividends and accrued interest receivable) less all
liabilities (including accrued expenses), by the number of shares outstanding.
Portfolio securities are valued at the last sale price on the securities
exchange or national securities market on which such securities primarily are
traded. Securities not listed on an exchange or national securities market, or
securities in which there were no transactions, are valued at the average of the
most recent bid and asked prices. Any securities or other assets for which
recent market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Trustees. Short-term obligations are
valued at amortized costs. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the net
asset value of the Fund's shares.
6
<PAGE>
24
Generally, trading in non-U.S. securities, as well as corporate bonds,
U.S. government securities, money market instruments and repurchase agreements,
is substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the net
asset value of the shares of the Fund are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of the
Exchange. Occasionally, events affecting the value of securities and such
exchange rates may occur between the times at which they are determined and the
close of the Exchange, which will not be reflected in the computation of net
asset value. If during such periods events occur which materially affect the
value of such securities, the securities will be valued at their fair market
value as determined in good faith by the trustees.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussions here and in the
Fund's Prospectus are not intended as a substitute for careful tax planning.
Since the shareholders of the Fund are tax-exempt entities, they should
generally not be subject to federal income tax consequences as a result of
ownership and disposition of shares of the Fund. However, the special tax rules
affecting tax-exempt investors are not discussed herein or in the prospectus,
and thus, each prospective investor should consult its own tax advisor regarding
the purchase of an investment in the Fund.
QUALIFICATION AS REGULATED INVESTMENT COMPANY
The Fund has elected to be taxed as a regulated investment company under
subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, the Fund is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Fund made during the
taxable year, or under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, the Fund may have to
limit the sale of appreciated securities that it has held for less than three
months. However, the Short-Short Gain Test will not prevent the Fund from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded for this purpose.
Interest (including original issue discount) received by the Fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of such
security within the meaning of the Short-Short Gain Test. However, income that
is attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
In general, gain or loss recognized by the Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation (other than a municipal obligation) purchased
by the Fund at a market discount (generally, at a price less than its principal
amount) will be treated as ordinary income to the extent of the portion of the
market discount which accrued during the period of time the Fund held the debt
obligation.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, or (2) the asset is otherwise held by the Fund as part of a "straddle"
(which term generally excludes a situation where the asset is stock and the Fund
grants a qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto) or (3) the asset is stock and the Fund
grants an in-the-
7
<PAGE>
25
money qualified covered call option with respect thereto. However, for purposes
of the Short-Short Gain Test, the holding period of the asset disposed of may be
reduced only in the case of clause (1) above. In addition, the Fund may be
required to defer the recognition of a loss on the disposition of an asset held
as part of a straddle to the extent of any unrecognized gain on the offsetting
position.
Treasury regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat all or part of any net capital
loss, any net long-term capital loss or any net foreign currency loss incurred
after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two more issuers which the Fund controls and which are engaged
in the same or similar trades or businesses.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall:
(1) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
FUND DISTRIBUTIONS
Ordinarily, shareholders are required to take distributions by the
Fund into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
EFFECT OF FUTURE LEGISLATION: LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the Treasury Regulations issued thereunder
as in effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court
8
<PAGE>
26
decisions may significantly change the conclusions expressed herein, and any
such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Fund.
PERFORMANCE INFORMATION
For the purposes of quoting and comparing the performance of the Fund to
that of other mutual funds and to stock or other relevant indices in
advertisements or in reports to Shareholders, performance will be stated in
terms of total return, rather than in terms of yield. Under the rules of the
Securities and Exchange Commission, a fund's advertising performance must
include total return quotes calculated according to the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1,5 or 10)
ERV = Ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10
year periods at the end of the 1,5, 10 year periods
(or fractional portion thereof).
Under the foregoing formula the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication, and will cover one,
five, and ten year periods or a shorter period dating from the effectiveness of
the Fund's registration statement. Total return or "T" in the formula above, is
computed by finding the average annual compounded rates of return over the 1, 5
and 10 year periods (or fractional portion thereof) that would equate the
initial amount invested to the ending redeemable value.
The total return of the Fund for the period from December 31, 1985
through December 31, 1995 was as follows:
- ending redeemable value of initial $1,000 investment
pursuant to SEC rules: $2,210
The total return of the Fund for the five-year period from December 31,
1989 through December 31, 1995 was as follows:
- ending redeemable value of initial $1,000 investment
pursuant to SEC rules: $1,365
The total return of the Fund for the one-year period from December 31,
1994 through December 31, 1995 was as follows:
- ending redeemable value of initial $1,000 investment
pursuant to SEC rules: $1,266
SHAREHOLDER REPORTS
Shareholders will receive reports at least semi-annually showing the
Fund's holdings and other information. In addition, shareholders will receive
annual financial statements audited by Richard A. Eisner & Company, LLP, the
Fund's independent auditors.
9
<PAGE>
27
REPORT OF INDEPENDENT AUDITORS
Board of Trustees and Shareholders
Gintel ERISA Fund
Greenwich, Connecticut
We have audited the statement of net assets of the Gintel ERISA Fund as of
December 31, 1995, and the related statement of operations for the year then
ended, statements of changes in net assets for each of the years in the two-year
period then ended, and the condensed financial information for each of the years
in the five-year period then ended. These financial statements and condensed
financial information are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
enumerated above present fairly, in all material respects, the financial
position of Gintel ERISA Fund as of December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the condensed financial
information for each of the years in the five-year period then ended, in
conformity with generally accepted accounting principles.
/s/ Richard A. Eisner & Company, LLP
New York, New York
January 22, 1996
F-1
<PAGE>
28
GINTEL ERISA FUND Statement of Net Assets As of December 31, 1995
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES COST** VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
MORTGAGE INVESTMENTS (14.8%)
180,000 Capstead Mortgage Corporation $1,850,958 $4,117,500
DIVERSIFIED INDUSTRIES (11.7%)
300,000 Chart Industries, Inc. 1,420,685 2,287,500
30,000 Ogden Corporation 659,700 641,250
33,000 Portec, Inc.* 388,845 317,625
COPPER PRODUCER (11.2%)
50,000 Phelps Dodge Corporation 3,025,297 3,112,500
FOOD PRODUCTS (7.7%)
37,500 H.J. Heinz Company 1,059,375 1,242,188
50,000 Northland Cranberries, Inc. 766,880 887,500
ELECTRONIC SYSTEMS & EQUIPMENT (5.9%)
30,000 Harris Corporation 1,244,371 1,638,750
ENVIRONMENTAL SERVICES (5.3%)
50,000 Browning-Ferris Industries, Inc. 1,411,036 1,475,000
TEXTILE -- APPAREL (5.3%)
225,000 Oneita Industries, Inc.+* 3,010,290 1,462,500
OILFIELD SERVICES (5.0%)
20,000 Schlumberger Limited 1,190,437 1,385,000
OIL & GAS (4.6%)
8,000 Exxon Corporation 461,000 641,000
10,000 Kerr-McGee Corporation 538,125 635,000
FOREST PRODUCTS - PAPER (4.3%)
25,000 Union Camp Corporation 1,319,375 1,190,625
INTEGRATED STEEL PRODUCER (4.1%)
20,000 Nucor Corporation 989,563 1,142,500
INSURANCE (3.4%)
20,000 Mercury General Corporation 771,938 955,000
</TABLE>
F-2
<PAGE>
29
GINTEL ERISA FUND Statement of Net Assets (continued) As of December 31, 1995
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES COST** VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NATURAL GAS PRODUCING & DISTRIBUTION (2.5%)
15,000 Consolidated Natural Gas Company 667,000 680,625
TRANSPORTATION - RAILROAD (2.2%)
9,000 Union Pacific Corporation 573,000 594,000
FOOD PRODUCTS (1.4%)
12,500 Sara Lee Corporation 268,000 398,437
Miscellaneous Securities (0.3%) 91,875 90,000
- ------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (89.7%) 21,707,750 24,894,500
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENTS
2,847,000 Chase Securities, Inc. Repurchase Agreement
5.35% due 1/2/96 (Collateralized by U.S.
Government Obligations) 2,847,000 2,847,000
- ------------------------------------------------------------------------------------------------------------------------
Total Cash Equivalents (10.2%) 2,847,000 2,847,000
- ------------------------------------------------------------------------------------------------------------------------
Total Investments (99.9%) $24,554,750 27,741,500
Other assets net of liabilities (0.1%) 24,576
- ------------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Outstanding Shares (100.0%) $27,766,076
========================================================================================================================
Net asset value per share-based on 977,447 shares of
beneficial interest (offering and redemption price) $28.41
========================================================================================================================
</TABLE>
* Non-income producing investments
** Cost basis for Federal income tax purposes
+ Robert Gintel is Chairman of the Board of Oneita Industries and owns 16% of
its common stock. As a result, Oneita may be deemed to be an affiliate of
the Fund.
The accompanying notes to financial statements are an integral part hereof.
F-3
<PAGE>
<PAGE>
19
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
GINTEL FUND
Gintel Fund (the "Fund") is an open-end, non-diversified management
investment company whose investment objective is long-term capital appreciation
with minimum emphasis on current income. The Fund offers and redeems its shares
at net asset value. Investors pay no sales charge or commissions to purchase
Fund shares. The minimum initial investment is $5,000 including IRA's and
Keoghs. Minimum individual initial investments may be waived for omnibus
arrangements with certain broker dealers. There is no minimum for additional
investments.
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Fund's current Prospectus, a copy of which may
be obtained by writing Gintel Fund's Investment Advisor at 6 Greenwich Office
Park, Greenwich, CT 06831 or calling (203) 622-6400.
This Statement of Additional Information related to the Fund's
Prospectus dated May 1, 1996.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policy............................... 2
Investment Restrictions....................................... 2
Management.................................................... 3
Investment Advisor and Investment Advisory Agreement.......... 4
Administrator and Administrative Services Agreement........... 5
Portfolio Transactions and Brokerage.......................... 6
Allocation of Investments..................................... 6
Computation of Net Asset Value................................ 7
Tax Matters................................................... 7
Performance Information....................................... 11
Shareholder Reports........................................... 11
Report of Independent Certified Public Accountants............ F-1
Financial Statements.......................................... F-2
</TABLE>
<PAGE>
20
INVESTMENT OBJECTIVE AND POLICY
The following information supplements, and should be read in
conjunction with, the section in the Fund's Prospectus entitled "Investment
Objective and Policy".
As described in the Fund's Prospectus, the Fund invests in common
stocks or securities convertible into common stock. As a non-diversified
investment company, the Fund may concentrate its investments in as few as twelve
issues or four industry groups. The Fund will invest in major corporations whose
shares are listed on the New York Stock Exchange or the American Stock Exchange
but it will also invest in non-speculative securities traded in the
Over-the-Counter market provided that such investments do not exceed 25% of the
Fund's total assets at time of purchase. Although the Fund will have flexibility
to invest in a broad range of corporations, it will not purchase the securities
of any corporation with a record of less than three years continuous operations
(including that of predecessors) if such investment would exceed 5% of the
Fund's total assets at time of purchase. Up to 20% of the Fund's total assets
may be invested in foreign securities.
The Fund may lend its portfolio securities to brokers, dealers and
other institutional investors in an amount not to exceed 10% of the Fund's total
assets under circumstances where the borrower of such securities provides cash
or cash equivalents as collateral (such cash equivalents will be limited to
securities issued or guaranteed by the United States Government, its agencies or
instrumentalities) at all times in an amount at least equal to the value of the
borrowed securities, and the Fund will retain the right to obtain any dividend,
interest or other distribution on the securities and any increase in their
market value and reserves the right to terminate such arrangement at any time
(such right of termination may be exercised, among other reasons, to obtain the
return of the securities on loan for the purpose of voting on any matters
considered material by the Fund's management).
Unlike the investment objective of maximizing total investment return
and the investment restrictions set forth below (see "Investment Restrictions"),
which may not be changed without shareholder approval, the Fund has the right to
modify the investment policies described above without shareholder approval.
However, the Fund does not presently contemplate making any such modifications.
INVESTMENT RESTRICTIONS
The Fund has the following restrictions:
(1) with respect to 50% of its assets, the Fund may
not invest more than 5% of its total assets, at market value, in the
securities of one issuer (except the securities of the United States
Government) and may not purchase 10% of the outstanding voting
securities of a single issuer.
(2) with respect to the other 50% of its assets, the
Fund may not invest more than 25% of the market value of its total
assets in a single issuer.
These two restrictions, hypothetically, could give rise to a portfolio
with as few as twelve issues. To the extent that the Fund's assets are
invested in a smaller number of issues, there may be a greater risk in
an investment in the Fund than in a diversified investment company.
In addition, the Fund will not:
(1) make loans of money or securities other than (a)
through the purchase of securities in accordance with the Fund's
investment objectives, and (b) by lending portfolio securities in an
amount not to exceed 10% of the Fund's total assets;
(2) buy or sell commodities or commodity futures
contracts;
(3) underwrite securities;
(4) make short sales, except short sales made
"against the box" to defer recognition of taxable gains or losses and
in special arbitrage situations;
(5) invest for the purpose of exercising control or
management;
2
<PAGE>
21
(6) invest more than 5% of its total assets in the
securities of other investment companies or purchase more than 3% of
any other investment company's securities;
(7) invest in restricted securities (securities that
must be registered under the Securities Act of 1933, as amended, before
they may be offered and sold to the public;
(8) participate in a joint investment account;
(9) issue senior securities;
These investment restrictions may not be changed without approval by a
vote of a majority of the Fund's outstanding voting securities. Under the
Investment Company Act of 1940 (the "1940 Act"), such approval requires the
affirmative vote, at a meeting of shareholders, of the lessor of (a) more than
50% of the fund's outstanding shares, or (b) at least 67% of shares present or
represented at the meeting, provided that the holders of more than 50% of the
Fund's outstanding shares are present in person or represented by proxy.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values or
assets will not constitute a violation of that restriction.
While not fundamental policies, the Fund undertakes to comply with the
following investment restrictions:
(a) investments which are not readily marketable are limited
to 15% of each Fund's average net assets at the time of purchase; included in
this category are "restricted" securities, and any other assets for which an
active and substantial market does not exist at the time of purchase or
substantial market does not exist at the time of purchase or subsequent
valuation; restricted securities for purposes of this limitation do not include
securities eligible for resale pursuant to Rule 144A of the Securities Act of
1933 which have beed determined to be liquid by the Fund's Board of Trustees
based upon the trading markets of the securities;
(b) the Fund may not purchase securities on margin:
(c) the Fund may loan portfolio securities if collateral
values are continuously maintained at no less than 100% by "marking to market"
daily and the practice is fair, just and equitable as determined by a finding
that adequate with provision has been made for margin calls, termination of the
loan, reasonable servicing fees (including finder's fees), voting rights and
dividend rights;
(d) investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of the Fund's net assets; included in
such amount, but not to exceed 2% of the value of the Fund's net assets, may be
warrants which are not listed on the New York Stock Exchange or the American
Stock Exchange; and, warrants acquired by the Fund may be deemed to be without
value;
(e) the Fund may not invest in oil, gas and other mineral
leases (excluding readily marketable securities of companies which invest in
oil, gas, and other mineral leases); and
(f) the Fund will not purchase or sell real property
(including limited partnership interests, but excluding readily marketable
interests in real estate investment trusts or readily marketable securities of
companies which invest in real estate).
MANAGEMENT
Reference is made to the Fund's current Prospectus for the names of the
trustees and officers of the Fund and their principal occupations for the last
five years. Interested trustees do not receive trustee's fees. Each of the other
trustees receives an annual fee of $8,250 paid by the Fund plus expenses for
each meeting of the Board and of shareholders which he attends. The Chairman of
the Audit Committee receives an additional annual fee of $1,250.
Set forth below is information regarding compensation paid the period
from January 1, 1995-December 31, 1995:
<TABLE>
<CAPTION>
Pension or Retirement Estimated Annual
Name & Position Total Compensation Benefits Accrued as Part Benefits Upon Total Compensation from
from Gintel Fund of Fund Expenses Retirement Gintel Fund & Gintel ERISA Fund
<S> <C> <C> <C> <C>
Robert M. Gintel
(Chairman & C.E.O.) - 0 - $ 0 $ 0 - 0 -
Thomas H. Lenagh (Trustee) $ 8,250 $ 0 $ 0 $ 16,500
Francis J. Palamara
(Trustee & Chairman
of Audit Committee) $ 9,500 $ 0 $ 0 $ 19,000
Stephen G. Stavrides
(Trustee & President) - 0 - $ 0 $ 0 - 0 -
Russel R. Taylor (Trustee) $ 8,250 $ 0 $ 0 $ 16,500
</TABLE>
As of February 29, 1996, trustees and officers as a group beneficially
owned 1,011,113 shares of the Fund's common stock which represented 16.4% of the
Fund's outstanding shares.
3
<PAGE>
22
Under the terms of the Massachusetts General Corporation Law, the Fund
may indemnify any person who was or is a trustee, officer or employee of the
Fund to the maximum extent permitted by the Massachusetts General Corporation
Law; provided, however, that any such indemnification (unless ordered by a
court) shall be made by the Fund only as authorized in the specific case upon a
determination that indemnification of such persons is proper in the
circumstances. Such determination shall be made (i) by the Board of Trustees, by
a majority vote of a quorum which consists of trustees who are neither
"interested persons" of the Fund as defined in Section 2(a)(19) of the 1940 Act,
nor parties to the proceeding, or (ii) if the required quorum is not obtainable
or if a quorum of such trustees so directs by independent legal counsel in a
written opinion. No indemnification will be provided by the Fund to any trustee
or officer of the Fund for any liability to the Fund or its shareholders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of duty.
INVESTMENT ADVISOR AND
INVESTMENT ADVISORY AGREEMENT
Gintel Equity Management, Inc., (the "Investment Advisor"), 6 Greenwich
Office Park, Greenwich, Connecticut 06831 is the Investment Advisor to the Fund
under an investment advisory agreement (the "Advisory Agreement") entered into
September 6, 1986. The Investment Advisor identifies and analyzes possible
investments for the Fund and determines the amount, timing and form of such
investments. The Investment Advisor has the responsibility of monitoring and
reviewing the Fund's portfolio, and, on a regular basis, to recommend the
ultimate disposition of such investments. It is the Investment Advisor's
responsibility to cause the purchase and sale of securities in the Fund's
portfolio, subject at all times to the policies set forth by the Fund's Board of
Trustees.
Robert M. Gintel owns all the outstanding shares of the Investment
Advisor. Since 1971, the Investment Advisor has been managing discretionary
investment accounts for individual investors, corporate pension funds and profit
sharing plans, charitable foundations, universities and others.
The Investment Advisor receives a fee, payable at the beginning of each
quarter, for the performance of its service at an annual rate of 1% (.25%
quarterly) of the average daily net assets of the Fund during the preceding
quarter. The advisory fee is higher than that paid by most management companies,
but is the same as that charged other clients of the Investment Advisor.
The Investment Advisor's fee will be reduced for any fiscal year by any
amount necessary to prevent Fund expenses and liabilities (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, determined by the
Fund or the Investment Advisor but inclusive of the Investment Advisor's fee)
from exceeding the most restrictive expense limitations imposed by the
securities laws or regulations of those states or jurisdiction in which the
Fund's shares are registered or qualified for sale. Currently, the most
restrictive of such expense limitation would require the Investment Advisor to
reduce its fee so that ordinary expenses (excluding interest, taxes, brokerage
commissions and extraordinary expenses) for any fiscal year do not exceed 2.5%
of the first $30 million of the Fund's average daily net assets, plus 2.0% of
the next $70 million, plus 1.5% of the Fund's average daily net assets in excess
of $100 million. The amount of any such reduction shall be deducted from the
quarterly advisory fee, or if such amount exceeds the quarterly fee otherwise
payable, the Investment Advisor will repay such excess promptly.
Under the terms of the Agreement, the Fund pays all of its expenses,
including the costs incurred in connection with its maintenance of its
registration under the Securities Act of 1933, as amended, and the 1940 Act,
printing and mailing prospectuses to shareholders, transfer taxes on the sales
of portfolio securities, brokerage commissions, custodial and shareholder
transfer charges, legal and auditing expenses, preparation of shareholder
reports, trustees' fees and expenses, and expenses of trustee and shareholder
meetings.
The Investment Advisor also serves as Investment Advisor to Gintel
ERISA Fund, a non-diversified investment company, and receives an annual fee,
payable quarterly, of 1% of the Gintel ERISA Fund's average daily net assets.
The approximate net assets of Gintel ERISA Fund as of March 31, 1996, was $28
million.
For the fiscal year ended December 31, 1995, the Fund paid fees to the
Investment Advisor of $928,954. For the fiscal year ended December 31, 1994, the
Fund paid fees to the Investment Advisor of $1,252,354. For the fiscal year
ended December 31, 1993, the Fund paid fees to the Investment advisor of
$1,568,072.
The Agreement may be terminated without penalty on 60 days' written
notice by a vote of the majority of the Fund's Board of Trustees or by the
Investment Advisor, or by holders or a majority of the Fund's outstanding
shares. The Agreement was initially approved by the Fund's Board of Trustees on
September 6, 1986 including the affirmative vote of a majority of the trustees
who were not parties to the Agreement nor interested persons of any such party,
and by the sole shareholder of the Fund on September 6, 1986. The Agreement was
continued by the Board of Trustees on February 23, 1992. The Agreement will
continue from year-to-year provided it is approved at least annually, in the
manner stipulated in the 1940 Act. This requires that the Agreement and any
renewal be approved by a vote of the majority of the Fund's trustees who are not
parties thereto or interested persons of any such party, cast in person at a
meeting specifically called for the purpose of voting on such approval.
4
<PAGE>
23
ADMINISTRATOR AND ADMINISTRATIVE SERVICES AGREEMENT
The Administrative Services Agreement provides that in consideration
for the services to be provided by the Distributor and the payment by the
Distributor of substantially all of the Fund's expenses currently paid by the
Fund directly (except the Investment Advisor's fees, the fees paid to the
non-interested Trustees, certain transaction costs and expenses, interest, taxes
and extraordinary expenses) the Distributor will receive a fee payable at the
beginning of each quarter based on average daily net assets during the preceding
quarter at an annual rate of 1.25% of the first $50 million of the average daily
net assets of the Fund, 1.125% of the next $50 million of average daily net
assets and 1.0% of the average daily net assets in excess of $100 million. The
Fund's administrative services fee is higher than that of most other funds which
have an administrator; however, most other funds bear certain of their own
expenses that will be borne by the Distributor on behalf of the Fund.
The Administrative Services Agreement also permits the Distributor,
at its sole discretion, to use a portion of its fee, in an amount not to exceed
0.25% of the Fund's average daily net assets, to compensate itself as well as
certain other registered broker-dealers or financial institutions for certain
shareholder servicing activities. Therefore, the Administrative Services
Agreement provides that the Distributor, may, from time to time, pay a
shareholder servicing fee to certain registered brokers, including itself for
services provided in connection with the processing of orders for purchase or
redemption of the Fund's shares and certain other persons or entities for
furnishing services to specific shareholder accounts. In addition, the
Distributor may use income from sources other than its fee to compensate persons
for distribution and shareholder servicing or to pay for other
distribution-related expenses.
Pursuant to the terms of the Administrative Services Agreement, the
Distributor will furnish, without cost to the Fund, offices and office services
for the Fund, the services of the President, Secretary, Treasurer and one or
more Vice Presidents of the Fund, and such other personnel and facilities as are
required for the proper conduct of the Fund's affairs and to carry out their
obligations under such Agreement. In addition, the Distributor shall be
responsible for all brokerage commissions in connection with the purchase or
sale of the Fund's portfolio securities (excluding applicable transaction costs
such as Securities and Exchange Commission fees, exchange fees and certain sales
and transfer taxes which will be paid by the Fund). However, brokerage
commissions paid on trades executed through non-affiliated brokers will continue
to be paid by the Fund and credited against the administrative services fee to
be paid to the Distributor. The Distributor or the Fund's Investment Advisor
will pay for all expenses incurred regarding the printing and distribution of
prospectuses and any other promotional or sales literature used by the
Distributor or the Investment Advisor or furnished by the Distributor or the
Investment Advisor to purchasers in connection with the public offering of the
Fund's shares, the expenses of advertising in connection with such public
offering and legal expenses in connection with the foregoing.
Except as set forth below, the Distributor shall pay all expenses of
the Fund, including, without limitations: the charges and expenses of any
registrar, custodian, sub-custodian or depository appointed by the Fund for the
safe keeping of its cash, portfolio securities and other property, and any stock
transfer, dividend or accounting agent or agents appointed by the Fund; all fees
payable by the Fund to federal, state or other governmental agencies; the costs
and expenses of engraving or printing stock certificates, if any, representing
shares of the Fund; all costs and expenses in connection with the registration
and maintenance of registration of the Fund and its shares with the Securities
and Exchange Commission and various states and other jurisdictions (including
filing and legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders and to potential shareholders of the Fund; all expenses of
shareholder's meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; all expenses incident to the payment of
any dividend, distribution, withdrawal or redemption, whether in shares or in
cash; charges and expenses of any outside service used for pricing of the Fund's
shares; routine fees and expenses of legal counsel and of independent
accountants, in connection with any matter relating to the Fund; postage;
insurance premiums on property or personnel (including officers and trustees) of
the Fund which inure to its benefit; and all other charges and costs of the
Fund's operations unless otherwise explicitly assumed by the Fund. The Fund is
responsible for the payment of the following expenses not borne by the
Distributor; (i) the investment advisory fees paid to the Investment Advisor
pursuant to the terms of its Agreement with the Fund, (ii) the fees of the
trustees who are not "interested persons" of the Fund, as defined by the 1940
Act, and travel and related expenses of trustees for attendance at trustee and
shareholder meetings, (iii) certain transaction costs and expenses such as
regulatory agency fees and certain sales and transfer taxes, (iv) interest, (v)
taxes and (vi) extraordinary expenses, if any, including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto. Expenses which are attributable to the Fund are charged against
the income of the Fund in determining net income for dividend purposes.
The Investment Advisor and the Distributor have agreed to reduce their
aggregate fees for any fiscal year, or reimburse the Fund, to the extent
required, so that the amount of the ordinary expenses of the Fund paid or
incurred by the Fund does not exceed the expense limitations applicable to the
Fund imposed by the securities laws or regulations of those states or
jurisdictions in which the Fund's shares are registered or qualified for sale.
Expense reductions under state securities laws are unlikely because most of the
expense of the Fund can be expected to be borne by the Distributor.
For the fiscal year ended December 31, 1995, the Fund paid fees to the
Distributor of $1,107,572. For the fiscal year ended December 31, 1994, the Fund
paid fees to the Distributor of $1,439,854. For the four months ended December
31, 1993, the Fund paid fees to the Distributor of $1,755,572.
5
<PAGE>
24
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Board of Trustees, decisions to buy
and sell securities for the Fund are made by the Investment Advisor. The Board
of Trustees has authorized the Fund to use Gintel & Co. Limited Partnership
("Gintel & Co."), on an agency basis, to supervise and to effect a substantial
amount of the portfolio transactions which are executed on the New York and
American Stock Exchanges, Foreign or Regional Exchanges where relevant, or which
are traded in the Over-the Counter market. All such transactions will be subject
to the maximum discount which is presently extended by Gintel & Co. to the other
investment companies advised by the Investment Advisor and other unaffiliated
accounts of the Investment Advisor. Any profits resulting from brokerage
commissions earned by Gintel & Co. as a result of Fund transactions will accrue
to the benefit of the General Partners of Gintel & Co., several of whom are
officers of the Investment Advisor. The Investment Advisory Agreement does not
provide for any reduction in the investment advisory fee as a result of profits
resulting from brokerage commissions effected through Gintel & Co.
The Board of Trustees has adopted certain procedures incorporating the
standard of Rule 17e-1 issued by the securities and Exchange Commission under
the 1940 Act which requires that the commissions paid to Gintel & Co. must be
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time".
The Rule and the procedures also contain review requirements and require the
Investment Advisor to furnish reports to the Trustees and to maintain records in
connection with such reviews.
The Investment Advisor is further authorized to allocate the orders
placed by it on behalf of the Fund to such unaffiliated brokers who also provide
research or statistical material, or other services to the Fund or the
Investment Advisor for the Fund's use. Such allocation shall be in such amounts
and proportions as the Investment Advisor shall determine and the Investment
Advisor will report on said allocations regularly to the Board of Trustees
indicating the unaffiliated brokers to whom such allocations have been made and
the basis therefore. In addition, the Investment Advisor may consider sale of
shares of the Fund and Gintel ERISA Fund as a factor in the selection of
unaffiliated brokers to execute portfolio transactions for the Fund, subject to
the requirements of best net price and most favorable execution.
In selecting a broker to execute each particular transaction, the
Investment Advisor will take the following into consideration; the best net
price available; the reliability, integrity and financial condition of the
broker; the size and difficulty in executing the order; and the value of the
expected contribution of the broker to the investment performance of the Fund on
a continuing basis. Accordingly, the cost of the brokerage commissions on a
transaction for the Fund, may be greater than that available from other brokers
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies and procedures as the Board
of Trustees may determine, the Investment Advisor shall not be deemed to have
acted unlawfully or to have breached any duty solely by reason of its having
caused an unaffiliated broker that provides research services to the Investment
Advisor for the Fund's use to be paid an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker would have charged for effecting that transaction, if the Investment
Advisor determines in good faith that such amount of commission was reasonable
in relation to the value of the research service provided by such broker viewed
in terms of either that particular transaction or the Investment Advisor's
ongoing responsibilities with respect to the Fund. Under the Administrative
Services Agreement, however, the Distributor and not the Fund pays all brokerage
commissions on securities transactions.
For the fiscal years ended December 31, 1995, 1994 and 1993, the Fund
paid no commissions pursuant to the Administrative Services Agreement with the
Distributor under which all brokerage commissions are paid for by the
Distributor.
ALLOCATION OF INVESTMENTS
The Investment Advisor has other advisory clients which include
investment companies and individuals, trusts, pension and profit sharing funds,
some of which have similar investment objectives to the Fund. As such, there
will be times when the Investment Advisor may recommend purchases and/or sales
of the same portfolio securities for the Fund and its other clients. In such
circumstances, it will be the policy of the Investment Advisor to allocate
purchases and sales among the Fund and its other clients in a manner which the
Investment Advisor deems equitable, taking into consideration such factors as
size of account, concentration of holdings, investment objectives, tax status,
cash availability, purchase cost, holding period and other pertinent factors
relative to each account. Simultaneous transactions could adversely affect the
ability of the Fund to obtain or dispose of the full amount of a security which
it seeks to purchase or sell or the price at which such security can be
purchased or sold.
6
<PAGE>
25
COMPUTATION OF NET ASSET VALUE
The Fund determines the net asset value of its shares at the close of
the New York Stock Exchange, currently 4 p.m., on each day that the Exchange is
open for business and on such other days as there is sufficient trading in the
Fund's securities to affect materially its net asset value per share except for
New Year's Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas. Subscriptions to purchase shares of the
Fund received prior to the close of trading on the New York Stock Exchange,
currently 4 p.m., are confirmed at the net asset value determined that day or on
the business day next succeeding the date of receipt, if such orders are
received after the close of trading. The net asset value per share is determined
by dividing the market value of the Fund's securities as of the close of trading
plus any cash or other assets (including dividends and accrued interest
receivable) less all liabilities (including accrued expenses), by the number of
shares outstanding. Portfolio securities are valued at the last sale price on
the securities exchange or national securities market on which such securities
primarily are traded. Securities not listed on an exchange or national
securities market, or securities in which there were no transactions, are valued
at the average of the most recent bid and asked prices. Any securities or other
assets for which recent market quotations are not readily available are valued
at fair value as determined in good faith by the Board of Trustees. Short-term
obligations are valued at amortized costs. Expenses and fees, including the
management fee, are accrued daily and taken into account for the purpose of
determining the net asset value of the Fund shares.
Generally, trading in non-U.S. securities, as well as corporate bonds,
U.S. government securities, money market instruments and repurchase agreements,
is substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the net
asset value of the shares of the Fund are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of the
Exchange. Occasionally, events affecting the value of securities and such
exchange rates may occur between the times at which they are determined and the
close of the Exchange, which will not be reflected in the computation of net
asset value. If during such periods events occur which materially affect the
value of such securities, the securities will be valued at their fair market
value as determined in good faith by the trustees.
For purposes of determining the net asset value per share of the Fund
all assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the mean between the bid and offer prices of such
currencies against U.S. dollars quoted by any major bank.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the Fund's Prospectus is not intended as a substitute for
careful tax planning.
QUALIFICATION AS REGULATED INVESTMENT COMPANY
The Fund has elected to be taxed as a regulated investment company
under subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a
regulated investment company must: (1) derive at least 90% of its gross income
from dividends, interest, certain payments with respect to securities loans,
gains from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income ( including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies (the "Income Requirement"); and (2)
derive less than 30% of its gross income (exclusive of certain gains on
designated hedging transactions that are offset by realized or unrealized losses
on offsetting positions) from the sale or other disposition of stock, securities
or foreign currencies (or options, futures or forward contracts thereon) held
for less than three months (the "Short-Short Gain Test"). However, foreign
currency gains, including those derived from options, futures and forwards, will
not in any event be characterized as Short-Short Gain if they are directly
related to the regulated investment company's investments in stock or securities
(or options or futures thereon). Because of the Short-Short Gain Test, the Fund
may have to limit the sale of appreciated securities that it has held for less
than three months; however, the Short-Short Gain Test will not prevent the Fund
from disposing of investments at a loss, since the recognition of a loss before
the expiration of the three-month holding period is disregarded for this
purpose. Interest (including original issue discount) received by the Fund at
maturity or upon the disposition of a security held for less than three months
will not be treated as gross income derived from the sale or other disposition
of such security within the meaning of the Short-Short Gains Test. However,
income that is attributable to realized market appreciation will be treated as
gross income from the sale or other disposition of securities for this purpose.
7
<PAGE>
26
In general, gain or loss recognized by the Fund on the disposition of
an asset will be capital gain or loss. However, gain recognized on the
disposition of a debt obligation (other than a municipal obligation) purchased
by the Fund at a market discount (generally, at a price less than its principal
amount) will be treated as ordinary income to the extent of the portion of the
market discount which accrued during the period of time the Fund held the debt
obligation. In addition, under the rules of the Code Section 988, gain or loss
recognized on the disposition of a debt obligation denominated in a foreign
currency or an option with respect thereto (but only to the extent attributable
to changes in foreign currency exchange rates), and gain or loss recognized on
the disposition of a foreign currency forward contract, futures contract, option
or similar financial instrument, or of foreign currency itself, except for
regulated futures contracts or non-equity options subject to Code Section 1256
(unless the Fund elects otherwise), will generally be treated as ordinary income
or loss.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset is
used to close a "short-sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (2) the asset is otherwise held by the Fund as part of a "straddle" (which
term generally excludes a situation where the asset is stock and the Fund grants
a qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto or (3) the asset is stock and the Fund
grants an in-the-money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (1) above. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Treasury regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat all or part of any net capital
loss, any net long-term capital loss or any net foreign currency loss incurred
after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Fund's current and accumulated earnings
and profits. Such distributions generally will be eligible for the
dividends-received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election"). The balance
of such income must be distributed during the next calendar year. For the
foregoing purpose, a regulated investment company is treated as having
distributed any amount of which it is subject to income tax for any taxable year
ending in such a calendar year.
For purposes of this excise tax, a regulated investment company shall:
(1) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
8
<PAGE>
27
FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for Federal income
tax purposes, but they will qualify for the 70% dividends-received deductions
for corporations only to the extent discussed below.
The Fund may either retain or distribute to shareholders it net capital
gain for each taxable year. The Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares or whether such gain was recognized by the Fund prior to the
date on which the shareholder acquired his shares. The Code provides, however,
that under certain conditions only 50% of the capital gain recognized upon the
Fund's disposition of domestic "small business" stock will be subject to tax.
Conversely, if the Fund elects to retain its net capital gain, the Fund
will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If the Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
of record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for his shares by an amount equal to the deemed distribution less the
tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends-received deduction generally available
to corporations (other than corporations, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (1)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose, under the rules of Code Section 246(c)(3) and (4):
(i) any day more than 45 days (or 90 days in the case of certain preferred
stock) after the date on which the stock becomes ex-dividend and (ii) any period
during which the Fund has an option to sell, is under a contractual obligation
to sell, has made and not closed a short sale of, is the grantor of a
deep-in-the-money or otherwise nonqualified option to buy, or has otherwise
diminished its risk of loss by holding other positions with respect to, such (or
substantially identical ) stock; (2) to the extent that the Fund is under an
obligation (pursuant to a short sale or otherwise) to make related payments with
respect to positions in substantially similar or related property; or (3) to the
extent the stock on which the dividend is paid is treated as debt-financed under
the rules of Code Section 246A. Moreover, the dividends-received deduction for a
corporate shareholder may be disallowed or reduced (i) if the corporate
shareholder fails to satisfy the foregoing requirements with respect to its
shares of the Fund or (ii) by application of Code Section 246(b) which in
general limits the dividends-received deduction to 70% of the shareholder's
taxable income (determined without regard to the dividends-received deduction
and certain other items).
Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax is computed at a maximum marginal rate of
28% for noncorporate taxpayers and 20% for corporate taxpayers on the excess of
the taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. In addition, under the Superfund Amendments and Reauthorization Act of
1986, a tax is imposed for taxable years beginning after 1986 and before 1996 at
the rate of 0.12% on the excess of a corporate taxpayer's AMTI (determined
without regard to the deduction for this tax and the AMT net operating loss
deduction) over $2 million. For purposes of the corporate AMT and the
environmental superfund tax (which are discussed above), the corporate dividends
received deduction is not itself an item of tax preference that must be added
back to taxable income or is otherwise disallowed in determining a corporation's
AMTI. However, corporate shareholders will generally be required to take the
full amount of any dividend received from the Fund into account (without a
dividends-received deduction) in determining its adjusted current earnings,
which are used in computing an additional corporate preference item (i.e., 75%
of the excess of a corporate taxpayer's adjusted current earnings over its AMTI
(determined without regard to this item and the AMT net operating loss
deduction)) includable in AMTI.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known.
Distributions by the Fund which do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of ) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
9
<PAGE>
28
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of the Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November, or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such a calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to the
U. S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the Internal Revenue Service for failure
to report the receipt of interest or dividend income properly, or (3) who has
failed to certify to the Fund that it is not subject to backup withholding or
that it is a corporation or other "exempt recipient."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holdings period rules of Code Section
246(c)(3) and (4) (discussed above in connection with the dividends-received
deduction for corporations) generally will apply in determining the holding
period of shares. Under current law long-term capital gains of noncorporate
taxpayers are taxed at a maximum rate 11.6% lower than the maximum rate
applicable to ordinary income. Capital losses in any year are deductible only to
the extent of capital gains plus, in the case of a noncorporate taxpayer, $3,000
of ordinary income.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder") depends on whether the income from
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate) upon the gross amount of the dividend. Such a
foreign shareholder would generally be exempt from U.S. Federal income tax on
gains realized on the sale of shares of the Fund, capital gain dividends and
amounts retained by the Fund that are designated as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income dividends
, capital gain dividends,and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Fund may be
required to withhold U. S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of its
foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the Treasury Regulations issued thereunder
as in effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court
10
<PAGE>
29
decisions may significantly change the conclusions expressed herein, and any
such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Fund.
PERFORMANCE INFORMATION
For the purposes of quoting and comparing the performance of the Fund
to that of other mutual funds and to stock or other relevant indices in
advertisements or in reports to Shareholders, performance will be stated in
terms of total return, rather than in terms of yield. Under the rules of the
Securities and Exchange Commission, funds advertising performance must include
total return quotes calculated according to the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1,5 or 10)
ERV = Ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10
year periods at the end of the 1,5, 10 year periods
(or fractional portion thereof).
Under the foregoing formula the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication, and will
cover one, five, and ten year periods or a shorter period dating from the
effectiveness of the Fund's registration statement. Total return or "T" in the
formula above, is computed by finding the average annual compounded rates of
return over the 1, 5 and 10 year periods (or fractional portion thereof) that
would equate the initial amount invested to the ending redeemable value.
The total return of the Fund for the period from December 31, 1985
through December 31, 1995 was as follows:
- ending redeemable value of initial $1,000 investment
pursuant to SEC rules: $2,492
The total return of the Fund for the five-year period from December 31,
1989 through December 31, 1995 was as follows:
- ending redeemable value of initial $1,000 investment
pursuant to SEC rules: $1,609
The total return of the Fund for the one-year period from December 31,
1994 through December 31, 1995 was as follows:
- ending redeemable value of initial $1,000 investment
pursuant to SEC rules: $1,310
SHAREHOLDER REPORTS
Shareholders will receive reports at least semi-annually showing the
Fund's holdings and other information. In addition, shareholders will receive
annual financial statements audited by Richard A. Eisner & Company, LLP, the
Fund's independent auditors.
11
<PAGE>
30
REPORT OF INDEPENDENT AUDITORS
Board of Trustees and Shareholders
Gintel Fund
Greenwich, Connecticut
We have audited the statement of net assets of the Gintel Fund as of December
31, 1995, and the related statement of operations for the year then ended,
statements of changes in net assets for each of the years in the two-year period
then ended, and the condensed financial information for each of the years in the
five-year period then ended. These financial statements and condensed financial
information are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and condensed financial
information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
enumerated above present fairly, in all material respects, the financial
position of Gintel Fund as of December 31, 1995, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the condensed financial information for each
of the years in the five-year period then ended, in conformity with generally
accepted accounting principles.
/s/ Richard A. Eisner & Company, LLP
New York, New York
January 22, 1996
F-1
<PAGE>
31
GINTEL FUND Statement of Net Assets As of December 31, 1995
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES COST** VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
FOREST PRODUCTS - PAPER (9.7%)
150,000 Union Camp Corporation $6,750,336 $7,143,750
52,500 Weyerhaeuser Company 2,101,374 2,270,625
MORTGAGE INVESTMENTS (8.5%)
225,000 Capstead Mortgage Corporation 2,932,500 5,146,875
25,000 Federal National Mortage Association 834,712 3,103,125
COPPER PRODUCER (8.0%)
125,000 Phelps Dodge Corporation 7,623,777 7,781,250
SECURITY PROTECTION SYSTEMS (7.7%)
200,000 Checkpoint Systems, Inc. 1,567,464 7,475,000
DIVERSIFIED INDUSTRIES (7.3%)
700,000 Chart Industries, Inc. 3,205,420 5,337,500
25,000 Johnson Controls, Inc. 1,195,850 1,718,750
TEXTILE - APPAREL (4.5%)
665,000 Oneita Industries, Inc.+* 8,414,133 4,322,500
HEALTH CARE (4.0%)
50,000 Schering-Plough Corporation 540,155 2,737,500
75,000 GranCare, Inc.* 1,058,736 1,087,500
SAVINGS & LOAN (3.8%)
120,000 Charter One Financial Corporation 868,021 3,675,000
DIVERSIFIED CHEMICAL PRODUCER (3.6%)
50,000 E.I. du Pont de Nemours and Company 2,798,852 3,493,750
CONSTRUCTION & ENGINEERING (3.3%)
48,000 Fluor Corporation 2,223,496 3,168,000
MANUFACTURING (2.9%)
100,000 The Singer Co. N.V. 2,497,273 2,787,500
OILFIELD SERVICES (2.6%)
115,500 Newpark Resources, Inc.* 2,108,758 2,569,875
CONGLOMERATE (1.8%)
50,000 Tyco International LTD 1,278,937 1,781,250
BROADCAST EQUIPMENT (1.7%)
100,000 Vertex Communications Corporation* 1,550,000 1,687,500
SPECIALTY RETAILING(1.2%)
75,000 Price/Costco, Inc.* 1,011,187 1,143,750
</TABLE>
F-2
<PAGE>
32
GINTEL FUND Statement of Net Assets (continued) As of December 31, 1995
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES COST** VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SOFT DRINKS (1.2%)
20,000 PepsiCo. Inc. 696,562 1,117,500
POWER TOOLS (1.1%)
30,000 The Black & Decker Corporation 750,260 1,057,500
ENVIRONMENTAL SERVICES (0.8%)
100,000 OHM Corporation* 693,749 737,500
FOOD EQUIPMENT (0.4%)
7,000 Premark International, Inc. 292,000 354,375
Miscellaneous Securities*** (4.1%) 3,516,405 3,981,687
- ------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (78.2%) 56,509,957 75,679,562
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENTS
2,044,000 Chase Securities, Inc. Repurchase Agreement
5.35% due 1/2/96(Collateralized by U.S.
Government Obligations) 2,044,000 2,044,000
- ------------------------------------------------------------------------------------------------------------------------
Total Cash Equivalents (2.1%) 2,044,000 2,044,000
- ------------------------------------------------------------------------------------------------------------------------
Total Investments (80.3%) $58,553,957 77,723,562
===========
Receivable from short sales (18.4%) 17,798,554
Other assets net of liabilities (1.3%) 1,216,741
- ------------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Outstanding Shares (100.0%) $96,738,857
========================================================================================================================
Net asset value per share-based on 6,295,777 shares of
beneficial interest (offering and redemption price) $15.37
========================================================================================================================
</TABLE>
* Non-income producing investments
** Cost basis for Federal income tax purposes
*** Includes 19 investments, some of which are non-income producing investments.
+ Robert Gintel is Chairman of the Board of Oneita Industries and owns 16% of
its common stock. As a result, Oneita may be deemed to be an affiliate of
the Fund.
The accompanying notes to financial statements are an integral part hereof.
F-3
<PAGE>
33
GINTEL FUND Statement of Operations Year Ended December 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $1,811,480
Interest 197,749
----------
Total investment income 2,009,229
EXPENSES:
Administrative services fee (Note D) $1,107,572
Investment advisory fee (Note C) 928,954
Trustees' fees 27,453
State taxes 5,276
----------
Total expenses 2,069,255
----------
NET INVESTMENT LOSS (60,026)
NET REALIZED GAIN ON INVESTMENTS 5,682,632
NET INCREASE IN UNREALIZED APPRECIATION OF INVESTMENTS 19,306,875
----------
NET GAIN ON INVESTMENTS 24,989,507
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $24,929,481
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-4
<PAGE>
34
GINTEL FUND Statements of Changes in Net Assets Year Ended December 31
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (60,026) $ 329,828
Net realized gain on investments 5,682,632 1,062,638
Net increase (decrease) in unrealized appreciation
of investments 19,306,875 (21,596,352)
----------- -----------
Net increase (decrease) in net assets from operations 24,929,481 (20,203,886)
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income (51,107) (321,331)
Net realized gains from investment (5,689,197) (829,794)
----------- -----------
Net decrease from distributions (5,740,304) (1,151,125)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 1,577,646 3,780,624
Reinvestment of dividends 3,363,935 723,070
Cost of shares repurchased (15,669,171) (30,981,707)
----------- -----------
Net decrease from capital
share transactions (10,727,590) (26,478,013)
Total Increase (Decrease) 8,461,587 (47,833,024)
Net Assets - Beginning of Year 88,277,270 136,110,294
----------- -----------
Net Assets - End of Year $96,738,857 $88,277,270
=========== ===========
NET ASSETS CONSIST OF:
Capital Stock $78,314,870 $89,042,460
Undistributed net investment losses (266,292) (155,159)
Undistributed net realized gains
from security transactions 54,050 60,615
Unrealized appreciation (depreciation) on investments 18,636,229 (670,646)
----------- -----------
$96,738,857 $88,277,270
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-5
<PAGE>
35
GINTEL FUND Condensed Financial Information (Per Share Income and
Capital Changes*) Year Ended December 31
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $12.46 $15.11 $16.45 $13.48 $12.75
Income from
Investment Operations
Net investment income (loss) (.01) .04 (.06) .09 .32
Net realized and unrealized
gain (loss) on securities 3.86 (2.53) .37 3.23 1.66
- -------------------------------------------------------------------------------------------------------------
Total from Investment Income 3.85 (2.49) .31 3.32 1.98
- -------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income .01 .04 .10 .31
Capital gains .93 .12 1.65 .25 .94
- -------------------------------------------------------------------------------------------------------------
Total Distributions .94 .16 1.65 .35 1.25
- -------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $15.37 $12.46 $15.11 $16.45 $13.48
=============================================================================================================
Total Return 31.0% -16.5% 2.0% 24.7% 15.6%
- -------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of year $96,738,857 $88,277,270 $136,110,294 $164,620,218 $77,408,444
Ratio of operating expenses to
average net assets (Note D) 2.3%** 2.4%** 2.2%** 1.7%** 1.4%
Ratio of net investment
income (loss) to average
net assets (.1%) .3% (.3%) .9% 1.9%
Portfolio turnover rate 55.4% 69.6% 50.8% 56.0% 66.3%
Shares outstanding, end of year 6,295,777 7,085,466 9,008,802 10,009,980 5,741,424
</TABLE>
* The above per share information is based upon a daily average of shares
outstanding, which has been restated to reflect the 5.241835/1 split on
September 25, 1992
** The Fund's expense ratio includes brokerage commissions on portfolio
transactions paid for under the Fund's Administrative Services fee, and,
therefore, may appear higher than those of other mutual funds as well as
for the Fund in prior years. Other mutual funds do not include brokerage
commissions in their operating expenses, but instead add them to the cost
of securities purchased or deduct them from the proceeds of securities
sold.
The accompanying notes to financial statements are an integral part hereof.
F-6
<PAGE>
36
GINTEL FUND Notes to Financial Statements December 31, 1995
(NOTE A) -- ORGANIZATION:
The Gintel Fund (the "Fund") is a Massachusetts business trust formed under the
laws of the Commonwealth of Massachusetts with authority to issue an unlimited
number of shares of beneficial interest.
(NOTE B) -- SIGNIFICANT ACCOUNTING POLICIES:
1. Security Valuation:
Investments in securities are valued at the last reported sales price on the
last business day of the period, or in the absence of a recorded sale, at the
mean of the closing bid and asked price on that date. Short-term investments are
valued at cost which approximates market value.
2. Federal Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable income and long-term gains to its shareholders.
Therefore, only a nominal Federal income tax provision is required.
3. Other:
As is common in the industry, security transactions are accounted for on the
trade date. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Realized gain or loss on security transactions is determined on the basis of
first-in, first-out or specific identification.
(NOTE C) -- INVESTMENT ADVISORY AGREEMENT:
The Fund has entered into an Investment Advisory Agreement with Gintel Equity
Management, Inc., a related party, which provides for an annual fee of 1% to be
paid quarterly, based on the daily value of the Fund's net assets during the
preceding quarter. The fee will be reduced for any fiscal year, if the Fund's
expenses, as defined, exceed certain limitations.
(NOTE D) -- ADMINISTRATIVE SERVICES AGREEMENT:
The Fund has entered into an Administrative Services Agreement which provides
that in consideration for the services provided by Gintel & Co., the Fund's
Distributor and a related party, and the payment by the Distributor of
substantially all of the Fund's expenses, including but not limited to brokerage
commissions and operating expenses (but excluding the Investment Advisor's fees,
the fees paid to non-interested Trustees, certain transaction costs, interest,
taxes and extraordinary expenses), the Distributor will receive a fee payable at
the beginning of each quarter based on average daily net assets during the
preceding quarter, at an annual rate of 1.25% of the first $50 million of the
average daily net assets of the Fund, 1.125% of the next $50 million of the
average daily net assets and 1.0% of the average daily net assets in excess of
$100 million.
F-7
<PAGE>
37
GINTEL FUND Notes to Financial Statements -- continued December 31, 1995
(NOTE E) -- LINE OF CREDIT:
The Fund has a bank line of credit of $15,000,000. Interest is payable at prime.
Loans are collateralized by securities owned by the Fund. At December 31, 1995
the Fund had no outstanding borrowings.
(NOTE F) -- OTHER MATTERS:
<TABLE>
<S> <C>
1. Investments
Unrealized appreciation at December 31, 1995 $34,420,670
Unrealized depreciation at December 31, 1995 (6,111,603)
$28,309,067
===========
</TABLE>
The above totals include a net unrealized gain of approximately $9,139,000 on
securities sold short which have been offset against long positions.
FOR THE YEAR ENDED DECEMBER 31, 1995
Purchases of securities other than Sales of securities other than
short-term investments short-term investments
$47,225,369 $56,654,292
2. Capital Stock: (in shares)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Shares issued 115,098 268,160
Shares reinvested 220,009 58,265
Shares repurchased (1,124,796) (2,249,761)
---------- ----------
Net decrease (789,689) (1,923,336)
========== ==========
</TABLE>
F-8
<PAGE>
Pro Forma Statement of Assets and Liabilities
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Gintel Fund
Gintel Gintel (immediately after
Fund ERISA Fund Reorganization)
------ ---------- -------------------
<S> <C> <C> <C>
Assets
Investments in securities, at value----
(identified cost -- Gintel Fund $ 82,306,084 $110,005,437 $30,210,125 $140,215,562
ERISA Fund $ 27,421,576,
Combined Fund $109,727,660)
Cash 35,482 5 35,487
Deposits with brokers for securities sold short 6,402,907 0 6,402,907
Receivables
Securities sold 1,872,737 2,062,306 3,935,044
Due from broker 954,100 0 954,100
Dividends and interest 381,169 53,287 434,455
------------ ----------- ------------
Total assets 119,651,832 32,325,723 151,977,555
------------ ----------- ------------
Liabilities
Securities sold short, at value ----
(proceeds -- Gintel Fund $6,402,907, 6,875,000 0 6,875,000
Combined $6,402,907)
Payables
Securities purchased 2,897,796 3,362,999 6,260,795
Capital stock reaquired 96,664 29,948 126,613
Accrued expenses 10,242 9,861 20,103
------------ ----------- ------------
Total liabilities 9,879,703 3,402,808 13,282,511
------------ ----------- ------------
Net Assets $109,772,129 $28,922,915 $138,695,044
============ =========== ============
Net asset value per share -- (Note F--2) $17.94 $31.98 $17.94
============ =========== ============
(based on shares outstanding -- Gintel Fund 6,118,707
ERISA Fund 904,500,
Combined Fund 7,730,910) of
beneficial interest (offering and redemption price)
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
PROFORMA SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
(Unaudited)
Number
of Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS
MORTGAGE BANKING (21.1%)
930,000 Capstead Mortgage Corporation $25,923,750
100,000 Federal National Mortgage Association 3,350,000
DIVERSIFIED MANUFACTURING & SERVICES (13.5%)
715,000 Chart Industries, Inc. 10,099,375
50,000 Tyco International LTD 2,037,500
100,000 The Singer Co N.V. 2,025,000
25,000 Johnson Controls, Inc. 1,737,500
75,000 Ogden Corporation 1,359,375
30,000 The Black & Decker Corporation 1,158,750
30,000 Portec, Inc.* 300,000
TECHNOLOGY RELATED (7.2%)
400,000 Intergraph Corporation 4,850,000
100,000 C-Cube Microsystems Inc.* 3,300,000
75,000 CheckFree Corporation* 1,490,625
25,000 Cognex Corporation* 403,125
PAPER - FOREST PRODUCTS (6.9%)
150,000 Union Camp Corporation 7,312,500
52,500 Weyerhaeuser Company 2,231,250
SECURITY PROTECTION SYSTEMS (5.0%)
200,000 Checkpoint Systems, Inc. 6,875,000
PHARMACEUTICAL - HEALTH CARE (4.2%)
70,000 Schering-Plough Corporation 4,392,500
75,000 GranCare, Inc. * 1,490,625
INSURANCE (3.2%)
100,000 Mercury General Corporation 4,375,000
SAVINGS & LOAN (3.0%)
120,000 Charter One Financial Corporation 4,185,000
RETAIL RELATED (2.8%)
100,000 Price/Costco Inc. * 2,162,500
100,000 Mac Frugals Bargains Close-Outs Inc.* 1,775,000
CONSTRUCTION & ENGINEERING (2.3%)
48,000 Fluor Corporation 3,138,000
COPPER PRODUCER (2.3%)
50,000 Phelps Dodge Corporation 3,118,750
OIL & GAS (2.2%)
20,000 Schlumberger Limited 1,685,000
8,000 Exxon Corporation 695,000
10,000 Kerr-McGee Corporation 608,750
<PAGE>
PROFORMA SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
(Unaudited)
Number
of Market
Shares Value
- --------------------------------------------------------------------------------
TEXTILE -- APPAREL (2.1%)
890,000 Oneita Industries, Inc. + * 2,781,250
8,000 Haggar Corp. 108,000
DIVERSIFIED CHEMICAL PRODUCER (1.7%)
30,000 E.I. du Pont de Nemours and Company 2,373,750
FOOD PRODUCTS (1.6%)
37,500 H.J. Heinz Company 1,139,062
20,000 Northland Cranberries, Inc. 600,000
12,500 Sara Lee Corporation 404,688
AIRFREIGHT (1.4%)
75,000 Airborne Freight Corporation 1,950,000
BROADCAST EQUIPMENT (1.3%)
100,000 Vertex Communications Corporation * 1,862,500
NATURAL GAS PRODUCING & DISTRIBUTION (1.3%)
30,000 Consolidated Natural Gas Company 1,567,500
10,000 Equitable Resources, Inc. 282,500
OILFIELD SERVICES (1.3%)
50,000 Newpark Resources, Inc. * 1,837,500
ELECTRONIC SYSTEMS & EQUIPMENT (1.3%)
30,000 Harris Corporation 1,830,000
SOFT DRINKS (1.0%)
40,000 PepsiCo. Inc. 1,415,000
ENVIRONMENTAL SERVICES (0.5%)
100,000 OHM Corporation * 700,000
AUTO MANUFACTURING (0.5%)
20,000 Ford Motor Company 647,500
CONSUMER PRODUCTS (0.3%)
10,000 American Brands, Inc. 453,750
MISCELLANEOUS SECURITIES *** (1.7%) 2,320,687
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (89.7%) 124,353,562
(Cost Basis:** $93,865,660)
<PAGE>
- --------------------------------------------------------------------------------
PROFORMA SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
(Unaudited)
Principal
Amount
- --------------------------------------------------------------------------------
CASH EQUIVALENTS
10,862,000 Chase Securities, Inc. Repurchase Agreement 10,862,000
5.15% due 7/1/96 (Collateralized by U.S
Government Obligations)
5,000,000 General Electric Capital Corporation 5,000,000
5.38% due 7/11/96
- -------------------------------------------------------------------------------
TOTAL CASH EQUIVALENTS(11.4%) 15,862,000
(Cost Basis:** $15,862,000)
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.6%) 140,215,562
===============================================================================
* Non-income producing investments
** Cost basis for Federal income tax
purposes.
*** Includes 14 investments, some of which are non-income producing investments.
+ Robert Gintel is Chairman of the Board of Oneita Industries and owns 16% of
its common stock. As a result, Oneita may be deemed to be an affiliate of
the Fund.
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS Twelve Months Ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
GINTEL GINTEL ERISA PRO FORMA
FUND FUND ADJUSTMENT PRO FORMA
============ ============ ============= =============
<S> <C> <C> <C> <C>
Dividend and interest income $ 2,779,374 $ 1,102,182 $ 3,881,556
------------ ------------ ------------
Administrative service fee 1,139,526 348,591 (64,389)* 1,423,728
Investment advisory fee 957,356 278,872 1,236,228
Other expenses 33,017 30,963 (2,000)** 61,980
------------ ------------ ------------ ------------
2,129,899 658,426 (66,389) 2,721,936
------------ ------------ ------------ ------------
Net investment income 649,475 443,756 66,389 1,159,620
------------ ------------ ------------ ------------
Net realized gain on investments 18,716,613 5,451,552 24,168,165
Change in unrealized appreciation
for the period 7,103,316 66,161 7,169,477
------------ ------------ ------------
Net gain on investments 25,819,929 5,517,713 31,337,642
------------ ------------ ------------
Net increase in net assets
resulting from operations $ 26,469,404 $ 5,961,469 $ 66,389 $ 32,497,262
============ ============ ============ ============
</TABLE>
* Adjusted to reflect the decrease in the annual rate which would have been in
effect had the funds been combined July 1, 1996.
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
Pro Forma Notes to Financial Statements June 30, 1996
(Unaudited)
(NOTE A ) -- ORGANIZATION:
The Gintel Fund (the "Fund") is a Massachesetts business trust formed under the
laws of the Commonwealth of Massachusetts with authority to issue an unlimited
number of shares of beneficial interest.
(NOTE B) -- SIGNIFICANT ACCOUNTING POLICIES:
1. Security Valuation:
Investments in securities are valued at the last reported sales price on the
last business day of the period, or in the absence of a recorded sale, at the
mean of the closing bid and asked price on that date. Short-term investments are
valued at cost which approximates market value.
2. Federal Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable income and long-term gains to its shareholders.
Therefore, only a nominal Federal income tax provision is required.
3. Other:
As is common in the industry, security transactions are accounted for on the
trade date. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Realized gain or loss on security transactions is determined on the basis of
first-in, first-out or specific identification.
(NOTE C ) -- INVESTMENT ADVISORY AGREEMENT:
The Fund has entered into an Investment Advisory Agreement with Gintel Equity
Management Inc., a related party, which provides for an annual fee of 1% to be
paid quarterly, based on the daily value of the Fund's net assets during the
preceding quarter. The fee will be reduced for any fiscal year, if the Fund's
expenses, as defined, exceed certain limitations.
(NOTE D ) -- ADMINISTRATIVE SERVICES AGREEMENT:
The Fund has entered into an Administrative Services Agreement which provides
that in consideration for the services provided by Gintel & Co., the Fund's
Distributor and a related party, and the payment by the Distributor of
substantially all of the Fund's expenses, including but not limited to brokerage
commissions and operating expenses (but excluding the Investment Advisor's fees,
the fees paid to non-interested Trustees, certain transaction costs, interest,
taxes and extraordinary expenses), the Distributor will receive a fee payable at
the beginning of each quarter based on average daily net assets during the
preceding quarter, at an annual rate of 1.25% of the first $50 million of the
average daily net assets of the Fund, 1.125% of the next $50 million of the
average daily net assets and 1.0% of the average daily net assets in excess of
$100 million.
<PAGE>
Pro Forma Notes to Financial Statements - - - continued June 30, 1996
(Unaudited)
(NOTE E ) -- LINE OF CREDIT:
The Fund has a bank line of credit of $15,000,000. Interest is payable at prime.
Loans are collateralized by securities owned by the Fund. At June 30, 1996 the
Fund had no outstanding borrowings.
(NOTE F ) -- OTHER MATTERS:
1. Investments
Unrealized appreciation at June 30, 1996 $40,045,199
Unrealized depreciation at June 30, 1996 (10,029,390)
----------
$30,015,809
===========
PRO FORMA FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
Purchase of securities other than short-term investments $70,137,797
Sales of securities other than short-term investments $89,675,661
2. Acquisition of Gintel ERISA Fund
Pursuant to a plan of reorganization and upon approval by the shareholders of
the Gintel ERISA Fund, the Gintel Fund will acquire all the net assets of the
Gintel ERISA Fund. If the aquisition had occurred on June 30, 1996, the tax free
exchange of 1,612,203 shares of the Gintel Fund (valued at $29 million) for the
904,500 shares of Gintel ERISA Fund would have occurred. Gintel ERISA Fund's net
assets on June 30,1996 ($29 million), would be combined with those of Gintel
Fund. The aggregate net assets of Gintel Fund and Gintel ERISA Fund immediately
before the proposed acquisition were $109,772,129 and $28,922,915 respectively.
The combined net asstes immediately after the acquisition, based on a date of
June 30, 1996, were $138,695,044. Prior to the acquisition, Gintel ERISA Fund
will distribute substantially all of its undistributed net investment income and
net realized gain on investments. As of July 24, 1996, such amount aggregates
$4,000,000, which may increase or decrease prior to the closing. The Fund does
not anticipate that the net assets will decrease materially by the distribution
since the majority of Gintel ERISA Fund's shareholders are expected to reinvest
their distributions.
3. Capital Stock: ( in shares )
PRO FORMA
YEAR ENDED
6/30/96
----------
Shares issued 159,522
Shares issued in connection with the
acquisition of Gintel ERISA Fund 1,612,203
Shares reinvested 231,314
Shares repurchased (742,106)
---------
Net increase (decrease) 1,260,933
=========
<PAGE>
1
[GINTEL LOGO]
GINTEL FUND
SEMIANNUAL REPORT TO
SHAREHOLDERS
JUNE 30, 1996
<PAGE>
2
GINTEL FUND
The investment objective is to achieve capital appreciation through investing
in equities. The minimum initial investment in the Gintel Fund is $5,000,
including IRA's and Keogh's. There is no minimum on additional investments.
SUMMARY OF INVESTMENT RESULTS*
<TABLE>
<S> <C>
1996(6 mos.) 16.7%
1995 31.0%
1994 -16.5%
1993 2.0%
1992 24.7%
1991 15.6%
1990 -6.7%
1989 23.8%
1988 29.4%
1987 -14.3%
1986 20.8%
1985 20.0%
1984 -2.6%
1983 34.3%
1982 34.1%
1981 (6/10/81-12/31/81) 7.6%
Average Annual Total
Return Since Inception 14.6%
</TABLE>
*Investment results are net of expenses, with
dividends and capital gains reinvested.
Past results offer no assurance as to future performance. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares when redeemed may be worth more or less than their original
cost. The Fund's prospectus contains more complete information and should be
read carefully.
<PAGE>
3
July 12, 1996
Fellow Shareholders:
Net asset value per share increased 8.4% in the second quarter of 1996 and
16.7% for the six months year-to-date. This strong investment performance was
well above the general market indices and better than the results achieved by
most other mutual funds so far this year. In fact, according to Lipper
Analytical Services, Inc., we rank as number 4 out of 103 growth funds in the
$100 million-$250 million category; number 36 out of all 705 growth funds; and
number 362 out of 5932 long-term taxable funds. Needless to say, we are
pleased to be able to report these excellent results, coming as they do on top
of the 31% gain in net asset value per share achieved in 1995. It's nice to be
up amongst the best-performing funds once again after the humbling experience
of 1994.
Our short-term outlook is somewhat more conservative than it has been in the
recent past. We hope to keep a steady hand on the tiller while charting an
investment course through potentially treacherous waters. As we enter the
second half of 1996, we see a mature, slower-growth economy facing increasing
inflationary pressures and possibly somewhat higher short- and long-term
interest rates. Long-deferred wage increases and a more militant union
leadership should result in higher labor costs and increased pressures on
profit margins. The consequence could be little or no growth in corporate
profits, except for those able to increase efficiency and productivity through
technological advances. The pending presidential and congressional elections
could be an additional market depressant until the outcome is known in early
November.
Some of the recent stock market gyrations cannot be comforting for any rational
investor. Mutual fund and other professional money managers are finding it
extremely difficult to manage carefully the ever-increasing amounts of money
pouring into their hands from the investing public. More than ever, investment
managers are forced to focus on short-term results by clients who have come to
expect large short-term gains from playing the stock market and from the army
of consultants who now rate everyone's short-term performance. The market has
been flooded with hot new issues and money is pouring into small-cap mutual
funds because that's where the action is. But, let one of these companies
hiccup and its stock price will plummet, as professional money managers dump
their shares mercilessly.
<PAGE>
4
Too many investors today buy and sell stocks not knowing and little caring
what they own and why they own it. Chartists, momentum players, and program
traders, among other short-term investors, create excessive volatility in stock
prices, aided by Wall Street Research staffs, one of whose major criteria for
a stock's valuation has to do with how closely a company may reach "the
Street's" consensus estimates of quarterly earnings. Our financial performance
in the first half of 1996 was not the result of investing in hot new issues,
speculative small growth companies, or leveraging the portfolio. We stayed
with sound, long-term investments that increased in value for the right reasons
and found new stocks that also performed well.
Gintel Fund shareholders should know that we are planning to ask Gintel ERISA
Fund shareholders to vote on merging the ERISA Fund into Gintel Fund towards
summer's end. This will create a combined $140 million fund, reduce fee costs
for the shareholders of both funds, save taxes for Gintel Fund shareholders,
and enable the investment staff to manage the Funds' assets more efficiently.
For the past seven years we have been offering U.S. Trust's money market funds
as a convenience to our shareholders. In view of Chase Manhattan Bank's
purchase of U.S. Trust Company's mutual fund division, we have decided to
switch from the U.S. Trust-managed Excelsior Money Fund and Excelsior
Government Money Fund to comparable money market funds managed by Chase
Manhattan Bank. Shareholders who currently have money market accounts with us
will be receiving documentation in the next few weeks with respect to this
transfer from U.S. Trust's Excelsior Funds to either Vista Cash Management Fund
or Vista Federal Money Market Fund.
In order to better inform shareholders about our major investments, we have
enclosed synopses of the Funds' principal holdings.
We thank our shareholders once again for staying with us through thick and thin
and are delighted that at this point in time your patience and confidence has
paid off.
Cordially,
/s/ ROBERT M. GINTEL /s/ CECIL A. GODMAN, III /s/ EDWARD F. CARROLL
Robert M. Gintel Cecil A. Godman, III Edward F. Carroll
Chairman Investment Manager Investment Manager
<PAGE>
5
GINTEL FUND Statement of Net Assets As of June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES COST** VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
MORTGAGE BANKING (22.1%)
------------------------
750,000 Capstead Mortgage Corporation $15,985,177 $20,906,250
100,000 Federal National Mortgage Association 834,712 3,350,000
DIVERSIFIED MANUFACTURING(15.3%)
--------------------------------
700,000 Chart Industries, Inc. 3,205,420 9,887,500
50,000 Tyco International LTD 1,278,937 2,037,500
100,000 The Singer Co. N.V. 2,208,014 2,025,000
25,000 Johnson Controls, Inc. 1,195,850 1,737,500
30,000 The Black & Decker Corporation 750,260 1,158,750
PAPER -- FOREST PRODUCTS (8.7%)
-------------------------------
150,000 Union Camp Corporation 6,750,336 7,312,500
52,500 Weyerhaeuser Company 2,101,374 2,231,250
TECHNOLOGY-RELATED (7.7%)
-------------------------
300,000 Intergraph Corporation 3,954,002 3,637,500
100,000 C-Cube Microsystems Inc.* 3,055,796 3,300,000
75,000 CheckFree Corporation* 1,566,438 1,490,625
SECURITY PROTECTION SYSTEMS (6.3%)
----------------------------------
200,000 Checkpoint Systems, Inc. 758,778 6,875,000
PHARMACEUTICAL -- HEALTH CARE (5.4%)
------------------------------------
70,000 Schering-Plough Corporation 1,638,868 4,392,500
75,000 GranCare, Inc.* 1,058,736 1,490,625
SAVINGS & LOAN (3.8%)
---------------------
120,000 Charter One Financial Corporation 868,021 4,185,000
RETAIL-RELATED (3.6%)
---------------------
100,000 Price/Costco Inc.* 1,498,688 2,162,500
100,000 Mac Frugals Bargains Close-Outs Inc.* 1,262,500 1,775,000
INSURANCE (3.0%)
----------------
75,000 Mercury General Corporation 3,208,125 3,281,250
CONSTRUCTION & ENGINEERING (2.9%)
---------------------------------
48,000 Fluor Corporation 2,223,496 3,138,000
COPPER PRODUCER (2.8%)
----------------------
50,000 Phelps Dodge Corporation 2,992,527 3,118,750
TEXTILE--APPAREL (1.9%)
------------------------
665,000 Oneita Industries, Inc.+* 8,414,133 2,078,125
DIVERSIFIED CHEMICAL PRODUCER (1.8%)
------------------------------------
25,000 E. I. du Pont de Nemours and Company 1,396,470 1,978,125
</TABLE>
<PAGE>
6
GINTEL FUND Statement of Net Assets (continued) As of June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES COST** VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BROADCAST EQUIPMENT (1.7%)
--------------------------
100,000 Vertex Communications Corporation* 1,550,000 1,862,500
OILFIELD SERVICES (1.7%)
------------------------
50,000 Newpark Resources, Inc.* 779,065 1,837,500
SOFT DRINKS (1.3%)
------------------
40,000 PepsiCo. Inc. 696,562 1,415,000
AIRFREIGHT (1.2%)
-----------------
50,000 Airborne Freight Corporation 1,266,564 1,300,000
ENVIRONMENTAL SERVICES (0.6%)
-----------------------------
100,000 OHM Corporation* 693,749 700,000
Security Sold Short (-6.3%) (6,402,907) (6,875,000)
Miscellaneous Securities*** (1.8%) 1,780,486 2,008,187
- --------------------------------------------------------------------------------------------------------------------
Total Common Stocks (87.3%) 68,570,177 95,797,437
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH EQUIVALENTS
7,333,000 Chase Securities, Inc. Repurchase Agreement
5.15% due 7/1/96(Collateralized by U.S.
Government Obligations) 7,333,000 7,333,000
- --------------------------------------------------------------------------------------------------------------------
Total Cash Equivalents (6.7%) 7,333,000 7,333,000
- --------------------------------------------------------------------------------------------------------------------
Total Investments (94.0%) $75,903,177 103,130,437
===========
Other assets net of liabilities (6.0%) 6,641,692
- --------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Outstanding Shares (100.0%) $109,772,129
====================================================================================================================
Net asset value per share--based on 6,118,707 shares of
beneficial interest (offering and redemption price) $17.94
====================================================================================================================
</TABLE>
* Non-income producing investments
** Cost basis for Federal income tax purposes
*** Includes 13 investments, some of which are non-income producing
investments.
+ Robert Gintel is Chairman of the Board of Oneita Industries and owns 16% of
its common stock. As a result, Oneita may be deemed to be an affiliate of
the Fund.
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
7
GINTEL FUND Statement of Operations June 30, 1996
(Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $1,393,990
Interest 377,629
-------------
Total investment income 1,771,619
EXPENSES:
Administrative services fee (Note D) $579,962
Investment advisory fee (Note C) 487,743
Trustees' fees 13,921
State taxes 994
-------------
Total expenses 1,082,620
-------------
NET INVESTMENT INCOME 688,999
NET REALIZED GAIN ON INVESTMENTS 16,211,902
NET DECREASE IN UNREALIZED APPRECIATION OF INVESTMENTS (1,081,806)
-------------
NET GAIN ON INVESTMENTS 15,130,096
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $15,819,095
=============
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
8
GINTEL FUND Statements of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year
Ended 6/30/96 Ended 12/31/95
------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $688,999 $ (60,026)
Net realized gain on investments 16,211,902 5,682,632
Net increase (decrease) in unrealized appreciation
of investments (1,081,806) 19,306,875
------------- --------------
Net increase in net assets from operations 15,819,095 24,929,481
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income -- (51,107)
Net realized gains from investment -- (5,689,197)
------------- --------------
Net decrease from distributions -- (5,740,304)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 2,052,325 1,577,646
Reinvestment of dividends -- 3,363,935
Cost of shares repurchased (4,838,148) (15,669,171)
------------- --------------
Net decrease from capital
share transactions (2,785,823) (10,727,590)
Total Increase (Decrease) 13,033,272 8,461,587
Net Assets - Beginning of Year 96,738,857 88,277,270
------------- --------------
Net Assets - End of Period $109,772,129 $96,738,857
============= ==============
NET ASSETS CONSIST OF:
Capital Stock $75,529,047 $78,314,870
Undistributed net investment gains (losses) 422,707 (266,292)
Undistributed net realized gains
from security transactions 16,265,952 54,050
Unrealized appreciation on investments 17,554,423 18,636,229
------------- --------------
$109,772,129 $96,738,857
============= ==============
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
9
GINTEL FUND Condensed Financial Information
(Per Share Income and Capital Changes*) (Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31
Six Months -------------------------------------------------------------
Ended 6/30/96 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $15.37 $12.46 $15.11 $16.45 $13.48
Income from
Investment Operations
Net investment income (loss) .11 (.01) .04 (.06) .09
Net realized and unrealized
gain (loss) on securities 2.46 3.86 (2.53) .37 3.23
- ------------------------------------------------------------------------------------------------------------------------
Total from Investment Income 2.57 3.85 (2.49) .31 3.32
- ------------------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income -- .01 .04 .10
Capital gains -- .93 .12 1.65 .25
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions -- .94 .16 1.65 .35
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $17.94 $15.37 $12.46 $15.11 $16.45
========================================================================================================================
Total Return 16.7% 31.0% -16.5% 2.0% 24.7%
- ------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period $109,772,129 $96,738,857 $88,277,270 $136,110,294 $164,620,218
Ratio of operating expenses to
average net assets (Note D) 2.1%** 2.3%** 2.4%** 2.2%** 1.7%**
Ratio of net investment
income (loss) to average net assets 1.3% (.1%) .3% (.3%) .9%
Portfolio turnover rate 75.1% 55.4% 69.6% 50.8% 56.0%
Shares outstanding, end of period 6,118,707 6,295,777 7,085,466 9,008,802 10,009,980
</TABLE>
* The above per share information is based upon a daily average of shares
outstanding, which has been restated to reflect the 5.241835/1 split on
September 25, 1992
** The Fund's expense ratio includes brokerage commissions on portfolio
transactions paid for under the Fund's Administrative Services fee, and,
therefore, may appear higher than those of other mutual funds as well as
for the Fund in prior years. Other mutual funds do not include brokerage
commissions in their operating expenses, but instead add them to the cost
of securities purchased or deduct them from the proceeds of securities
sold.
<PAGE>
10
GINTEL FUND Notes to Financial Statements June 30, 1996
(Unaudited)
(NOTE A) -- ORGANIZATION:
The Gintel Fund (the "Fund") is a Massachusetts business trust formed under the
laws of the Commonwealth of Massachusetts with authority to issue an unlimited
number of shares of beneficial interest.
(NOTE B) -- SIGNIFICANT ACCOUNTING POLICIES:
1. Security Valuation:
Investments in securities are valued at the last reported sales price on the
last business day of the period, or in the absence of a recorded sale, at the
mean of the closing bid and asked price on that date. Short-term investments
are valued at cost which approximates market value.
2. Federal Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable income and long-term gains to its
shareholders. Therefore, only a nominal Federal income tax provision is
required.
3. Other:
As is common in the industry, security transactions are accounted for on the
trade date. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Realized gain or loss on security transactions is determined on the basis of
first-in, first-out or specific identification.
(NOTE C) -- INVESTMENT ADVISORY AGREEMENT:
The Fund has entered into an Investment Advisory Agreement with Gintel Equity
Management, Inc., a related party, which provides for an annual fee of 1% to be
paid quarterly, based on the daily value of the Fund's net assets during the
preceding quarter. The fee will be reduced for any fiscal year, if the Fund's
expenses, as defined, exceed certain limitations.
(NOTE D) -- ADMINISTRATIVE SERVICES AGREEMENT:
The Fund has entered into an Administrative Services Agreement which provides
that in consideration for the services provided by Gintel & Co., the Fund's
Distributor and a related party, and the payment by the Distributor of
substantially all of the Fund's expenses, including but not limited to
brokerage commissions and operating expenses (but excluding the Investment
Advisor's fees, the fees paid to non-interested Trustees, certain transaction
costs, interest, taxes and extraordinary expenses), the Distributor will
receive a fee payable at the beginning of each quarter based on average daily
net assets during the preceding quarter, at an annual rate of 1.25% of the
first $50 million of the average daily net assets of the Fund, 1.125% of the
next $50 million of the average daily net assets and 1.0% of the average daily
net assets in excess of $100 million.
<PAGE>
11
GINTEL FUND Notes to Financial Statements -- continued June 30, 1996
(Unaudited)
(NOTE E) -- LINE OF CREDIT:
The Fund has a bank line of credit of $15,000,000. Interest is payable at
prime. Loans are collateralized by securities owned by the Fund. At June 30,
1996 the Fund had no outstanding borrowings.
(NOTE F) -- OTHER MATTERS:
1. Investments
<TABLE>
<S> <C>
Unrealized appreciation at June 30, 1996 $34,642,677
Unrealized depreciation at June 30, 1996 (7,415,417)
-------------
$27,227,260
=============
FOR THE SIX MONTHS ENDED JUNE 30, 1996
Purchases of securities other than short-term investments $31,572,202
Sales of securities other than short-term investments $37,980,070
</TABLE>
2. Capital Stock: (in shares)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------- -----------------
<S> <C> <C>
Shares issued 116,410 115,098
Shares reinvested -- 220,009
Shares repurchased (293,480) (1,124,796)
------------- --------------
Net decrease (177,070) (789,689)
============= ==============
</TABLE>
<PAGE>
12
GINTEL FUND TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
Robert M. Gintel Chairman, Trustee, and Chief Executive Officer
Chairman and Chief Executive Officer, Gintel
Equity Management, Inc.; Senior Partner,
Gintel & Co. Limited Partnership; Chairman
and Director, Oneita Industries; Vice
Chairman and Director, XTRA Corporation;
Chairman, Trustee and Chief Executive
Officer, Gintel ERISA Fund.
Thomas H. Lenagh Trustee
Financial Consultant; formerly Chairman and
Chief Executive Officer of Greiner
Engineering Co.; Director, Adams Express
Co., USLife Corp., ICN Biomedics, Inc., SCI
Systems, Inc., Irvine Sensors Corp., CML
Inc., Clemente Global, Rexhall Inc.;
Trustee, Gintel ERISA Fund.
Francis J. Palamara Trustee
Business Consultant; previously Director and
Executive Vice President of ARA Services,
Inc.; formerly Executive Vice President and
Chief Operating Officer of the New York
Stock Exchange, Inc.; Director, Glenmede
Fund, XTRA Corporation, Central Tractor Farm
& Country; Trustee, Gintel ERISA Fund.
Russel R. Taylor Trustee
Associate Professor of Management and
Marketing, Director of H.W. Taylor Institute
of Entrepreneurial Studies, College of New
Rochelle; Founder of Russel Taylor, Inc.;
Trustee, Gintel ERISA Fund.
Stephen G. Stavrides Trustee, President, and Treasurer
President, Gintel Equity Management, Inc.;
General Partner and Chief Operating Officer,
Gintel & Co. Limited Partnership; Trustee,
President, and Treasurer, Gintel ERISA Fund.
Donna K. Grippe Secretary and Assistant Treasurer
<TABLE>
<S> <C>
INVESTMENT ADVISOR GINTEL GROUP
Gintel Equity Management, Inc. Chase Global Funds Services Company
6 Greenwich Office Park P. O. Box 2798
Greenwich, CT 06831-5197 Boston, MA 02208-2798
203 622-6400 800 344-3092
</TABLE>
<PAGE>
APPENDIX A
GINTEL ERISA FUND
SPECIAL MEETING OF SHAREHOLDERS -- SEPTEMBER 26, 1996
Please refer to the Proxy Statement for a discussion of these matters. THE
UNDERSIGNED HOLDER(S) OF SHARES OF STOCK OF THE GINTEL ERISA FUND HEREBY
CONSTITUTES AND APPOINTS ROBERT M. GINTEL AND STEPHEN G. STAVRIDES, OR EITHER OF
THEM, THE ATTORNEYS AND PROXIES OF THE UNDERSIGNED, WITH FULL POWER OF
SUBSTITUTION, TO VOTE THE SHARES LISTED BELOW AS DIRECTED, AND HEREBY REVOKES
ANY PRIOR PROXIES. To vote, mark an X in blue or black ink on the proxy card
below. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF GINTEL
ERISA FUND.
- -----Detach card at perforation and mail in postage paid envelope provided-----.
1. Vote on Proposal to approve an Agreement and Plan of Reorganization with
respect to the Gintel ERISA Fund.
FOR AGAINST ABSTAIN
|_| |_| |_|
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
- -----Detach card at perforation and mail in postage paid envelope provided------
GINTEL ERISA FUND
PROXY
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL OF EACH PROPOSAL.
Please sign exactly as name appears on this
card. When account is joint tenants, all
should sign. When signing as administrator,
trustee or guardian, please give title. If a
corporation or partnership, sign in entity's
name and by authorized person.
x___________________________________________
____________________________________________
____________________________________________
x___________________________________________
____________________________________________
____________________________________________
Dated:______________________________________
______________________________________, 1996
