<PAGE> 1
GINTEL
GINTEL
GINTEL FUND
ANNUAL REPORT TO
SHAREHOLDERS
DECEMBER 31, 1997
<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, except
for IRA's and Keogh accounts where the minimum initial purchase is $2,000. There
is no minimum on additional investments.
<TABLE>
<CAPTION>
SUMMARY OF INVESTMENT RESULTS
<S> <C>
1997 29.2%
1996 31.0%
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%
</TABLE>
Average Annual Total
Return Since Inception 15.9%
*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
Fellow Shareholders: January 28, 1998
We are glad to report for the year 1997 a 29.2% increase in the Fund's net
asset value per share, after dividend reinvestment. This is our third
consecutive year of superior investment results. Over the past three years
Gintel Fund's total return to its shareholders averaged more than 30% annually,
enabling us to recoup our A+ rating with Investor's Business Daily. In fact,
that publication recently featured the enclosed article on our Fund.
Our Fund's excellent performance in 1997 was made possible, in part, by
the price appreciation in a number of our key holdings, including a 110% gain in
Mercury General Corporation, a 100% gain in Chart Industries, a 58% gain in
CheckFree Holdings, a 53% gain in Federal National Mortgage Corporation, a 50%
gain in Ogden Corporation, and a 50% gain in Charter One Financial. In 1998 we
anticipate that investments in such stocks as Checkpoint Systems, Nobel
Education Dynamics, and Green Tree Financial will produce some of our best
returns. We also anticipate continuing, favorable returns from our very large
investment in CheckFree, as well as from Bergen Brunswig and Ogden, among
others. Stocks that penalized us last year were Oneita Industries, which we
sold, and C-Cube Microsystems, which we continue to hold.
Although many companies are still reporting favorable fourth quarter
earnings comparisons with year-ago levels, larger corporations in several
important industries are warning that such momentum is not likely to carry over
into 1998. Should the economy slow down, it may be difficult to pass on to
consumers the higher costs associated with rising wage and health benefit
expenses. Moreover, the economic and political turmoil in Southeast Asia could
create excess manufacturing capacity, which, along with sharp declines in the
relative value of foreign currencies, will pressure reported profits of
U.S.-based multinationals.
We think the economic environment is still favorable enough for stocks in
selected companies to perform well in spite of the above, and we expect our
chosen investments will do well. There is considerable momentum in the economy
resulting from low employment, low inflation, and low interest rates.
Furthermore, the U.S. economy is still the healthiest in the world, and our
strong dollar will most likely continue to attract foreign investments. So,
although market volatility will continue as the sentiment swings and stock
prices gyrate,
<PAGE> 4
we do not foresee the beginning of a major bear market. Notwithstanding the
rocky start, we hope 1998 will be another year of worthwhile gains.
On December 23, 1997, Gintel Fund shareholders of record as of December
22, 1997, received a dividend of $1.575 per share representing ordinary income
of $0.155 per share and long-term capital gains of $1.42 per share, of which
72.42% is subject to the 28% capital gains tax rate.
We thank our shareholders for their continuing loyalty and all our staff
members and employees for their dedicated efforts in our quest for favorable
investment results.
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 December 31, 1997
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES COST** VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
TECHNOLOGY-RELATED (26.5%)
--------------------------
1,650,000 CheckFree Holding Corporation* $27,926,136 $44,550,000
200,000 C-Cube Microsystems Inc.* 5,101,583 3,262,500
MORTGAGE BANKING (18.0%)
------------------------
800,000 Capstead Mortgage Corporation 10,184,448 15,950,000
415,000 Green Tree Financial Corporation 13,501,550 10,867,813
100,000 Federal National Mortgage
Association 834,713 5,706,250
MANUFACTURING & SERVICE (17.9%)
-------------------------------
818,500 Chart Industries, Inc. 2,040,042 18,672,031
400,000 Ogden Corporation 7,942,677 11,275,000
50,000 Johnson Controls, Inc. 1,195,850 2,387,500
INSURANCE (13.1%)
-----------------
430,000 Mercury General Corporation 9,393,586 23,757,500
SECURITY PROTECTION SYSTEMS (5.6%)
----------------------------------
575,000 Checkpoint Systems, Inc. 7,163,982 10,062,500
SAVINGS & LOAN (3.7%)
---------------------
105,000 Charter One Financial Corporation 675,428 6,628,125
DRUG & HEALTH CARE (3.5%)
-------------------------
150,000 Bergen Brunswig Corp. 6,168,079 6,318,750
COPPER PRODUCER (1.7%)
----------------------
50,000 Phelps Dodge Corporation 2,992,527 3,112,500
PAPER -- FOREST PRODUCTS (1.4%)
-------------------------------
52,500 Weyerhaeuser Company 2,101,374 2,575,781
BROADCAST EQUIPMENT (1.3%)
--------------------------
100,000 Vertex Communications Corporation* 1,550,000 2,412,500
ENVIRONMENTAL SERVICES (1.1%)
-----------------------------
250,000 OHM Corporation* 1,933,756 1,906,250
AUTO PARTS (1.0%)
-----------------
50,000 Echlin Inc. 1,626,325 1,809,375
EDUCATION (1.0%)
----------------
350,000 Nobel Education Dynamics, Inc. 2,768,640 1,771,875
BEVERAGES / FOOD (0.8%)
-----------------------
40,000 PepsiCo. Inc. 643,671 1,457,500
RETAIL-RELATED (0.2%)
---------------------
10,000 Mac Frugal's Bargains
Close-Outs Inc.* 135,000 411,250
</TABLE>
<PAGE> 6
GINTEL FUND Statement of Net Assets (continued) As of December 31, 1997
<TABLE>
<CAPTION>
MARKET
COST** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Miscellaneous Securities*** (3.3%) 4,808,553 5,962,032
Imputed Brokerage Commission on
Securities Owned 450,000
- ---------------------------------------------------------------------------------------------------------------------------
Total Common Stock (100.1%) 111,137,920 180,857,032
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH EQUIVALENTS
2,899,000 Chase Securities, Inc. Repurchase Agreement
5.95% due 1/2/98 (Collateralized by U.S.
Government Obligations) 2,899,000 2,899,000
- ---------------------------------------------------------------------------------------------------------------------------
Total Cash Equivalents (1.6%) 2,899,000 2,899,000
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments (101.7%) $114,036,920 183,756,032
===========
Liabilities net of other assets (-1.7%) (3,031,564)
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Outstanding Shares (100.0%) $180,724,468
===========================================================================================================================
Net asset value per share--based on 8,295,837 shares
of beneficial interest (offering and redemption price) $21.78
===========================================================================================================================
</TABLE>
* Non-income producing investments
** Cost basis for Federal income tax purposes
***Includes 10 investments, some of which are non-income producing investments.
See notes to financial statements.
<PAGE> 7
GINTEL FUND STATEMENT OF OPERATIONS YEAR END DECEMBER 31, 1997
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends $3,046,872
Interest 1,190,877
-----------
Total investment income 4,237,749
EXPENSES:
Investment advisory fee 1,616,405
Administrative expense 1,237,905
Other expenses 55,166
---------
Total expenses 2,909,476
-----------
NET INVESTMENT INCOME 1,328,273
NET REALIZED GAIN ON INVESTMENTS 10,157,788
NET INCREASE IN UNREALIZED APPRECIATION OF INVESTMENTS 30,268,425
----------
NET GAIN ON INVESTMENTS 40,426,213
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $41,754,486
===========
</TABLE>
See notes to financial statements.
<PAGE> 8
GINTEL FUND STATEMENTS OF CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996
---- ----
OPERATIONS:
<S> <C> <C>
Net investment income $ 1,328,273 $ 2,563,464
Net realized gain on investments 10,157,788 12,803,219
Net increase in unrealized appreciation
of investments 30,268,425 11,394,619
------------ ------------
Net increase from operations 41,754,486 26,761,302
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income (1,538,652) (2,653,175)
Net realized gains from investment (10,812,017) (12,796,654)
------------ ------------
Net decrease from distributions to shareholders (12,350,669) (15,449,829)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 9,158,835 42,947,300
Reinvestment of dividends 11,013,433 10,384,683
Cost of shares repurchased (16,757,312) (13,476,618)
------------ ------------
Net increase from capital share transactions 3,414,956 39,855,365
Total Increase 32,818,773 51,166,838
Net Assets - Beginning of Year 147,905,695 96,738,857
------------ ------------
Net Assets - End of Year $180,724,468 $147,905,695
============ ============
NET ASSETS CONSIST OF:
Capital Stock $111,912,353 $108,497,397
Undistributed net investment losses (566,383) (356,003)
Undistributed net realized gains (losses)
from security transactions (593,613) 60,615
Unrealized appreciation on investments 69,972,111 39,703,686
------------ ------------
$180,724,468 $147,905,695
============ ============
</TABLE>
See notes to financial statements.
<PAGE> 9
GINTEL FUND CONDENSED FINANCIAL INFORMATION YEAR ENDED DECEMBER 31
(Per Share Income and Capital Changes)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $18.10 $15.37 $12.46 $15.11 $16.45
Income from
Investment Operations
Net investment income (loss) .12 .37 (.01) .04 (.06)
Net realized and unrealized
gain (loss) on securities 5.13 4.40 3.86 (2.53) .37
- ---------------------------------------------------------------------------------------------------------------------------
Total from Investment Income 5.25 4.77 3.85 (2.49) .31
- ---------------------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income .15 .35 .01 .04
Capital gains 1.42 1.69 .93 .12 1.65
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions 1.57 2.04 .94 .16 1.65
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $21.78 $18.10 $15.37 $12.46 $15.11
===========================================================================================================================
Total Return 29.2% 31.0% 31.0% -16.5% 2.0%
- ---------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of year $180,724,468 $147,905,695 $96,738,857 $88,277,270 $136,110,294
Ratio of operating expenses to
average net assets * 1.8% 1.8% 2.3% 2.4% 2.2%
Ratio of net investment
income (loss) to average net assets .8% 2.2% (.1%) .3% (.3%)
Portfolio turnover rate 52.0% 61.4% 55.4% 69.6% 50.8%
Average commission rate paid * * * * *
Shares outstanding, end of year 8,295,837 8,171,707 6,295,777 7,085,466 9,008,802
</TABLE>
* The Fund's expense ratio for 1993 - 1995 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. 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. Beginning in 1996 the Fund changed
its accounting presentation to extract imputed brokerage commissions from its
expense ratio in order to make it easier to compare our Fund to other funds
which do not have a similar fee structure. Based upon the imputed brokerage
commission calculation the average commission rate paid for 1997 and 1996 was
$.0845 and $.0771 per share, respectively.
See notes to financial statements.
<PAGE> 10
GINTEL FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
(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's Investment Advisory Agreement with Gintel Asset Management, Inc., a
related party, provides for the annual fee of 1% based on the daily value of the
Fund's net assets.
(NOTE D) - ADMINISTRATIVE SERVICES AGREEMENT:
The Fund's Administrative Services Agreement 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 would receive an Administrative
Services Fee. The Distributor receives a fee 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.
(NOTE E) - IMPUTED COMMISSIONS:
The Fund provides for imputed brokerage commissions to be extracted from the
Administrative Services Fee and to be applied to the cost of securities sold and
held. For the year ended December 31, 1997, the Fund has estimated imputed
brokerage commissions to be $566,000 which decreased administrative expense, and
thereby increased net investment income and unrealized capital gains by $566,000
and $4,000, respectively, and decreased realized capital gains by $570,000.
<PAGE> 11
GINTEL FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1997
(NOTE F) - LINE OF CREDIT:
The Fund has a bank line of credit of $15,000,000. Interest is payable at the
Prime Rate. Loans are collateralized by securities owned by the Fund. At
December 31, 1997, the Fund had no outstanding borrowings.
(NOTE G) - OTHER MATTERS:
1. Investments
Unrealized appreciation at December 31, 1997 $ 75,673,485
Unrealized depreciation at December 31, 1997 (5,504,374)
Imputed Commissions on securities owned (450,000)
------------
$ 69,719,111
============
Year Ended
December 31, 1997
-----------------
Purchases of securities other than short-term investments $ 75,703,600
Sales of securities other than short-term investments $ 73,958,400
2. Related Party Transactions
During the year ended December 31, 1997, the Fund sold its entire holdings of
Oneita Industries, Inc. at market value of $490,552 to a related individual. The
Fund realized $5,179,738 of capital losses on the sale.
3. Capital Stock (in shares)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1997 1996
---- ----
<S> <C> <C>
Shares issued 426,934 538,198
Shares issued in connection with
acquisition of Gintel ERISA Fund --- 1,517,126
Shares reinvested 516,578 575,010
Shares repurchased (819,382) (754,404)
-------- --------
Net increase 124,130 1,875,930
======== ========
</TABLE>
<PAGE> 12
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, 1997, and the related statement of operations for the year then ended,
statement 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, 1997, 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, 1997, 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.
Richard A. Eisner & Company, LLP
New York, New York
January 22, 1998
<PAGE> 13
GINTEL ASSET MANAGEMENT, INC.
EQUITY STAFF
ROBERT M. GINTEL
Robert 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 Asset Management, Inc.
He is also 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. 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 Vice Chairman of the Board of XTRA Corporation.
Mr. Gintel has lectured and written articles on investments and has appeared on
Wall Street Week and other television and radio programs.
CECIL A. GODMAN, III
Mr. Godman joined the Gintel organization in 1985 after spending two
years as a securities analyst with First Tennessee Investment Management, Inc.,
a $1.8 billion asset management subsidiary of First Tennessee National
Corporation. He is a General Partner of Gintel & Co. and a director of Gintel
Asset Management, Inc. Mr. Godman received his B.A. in Business Administration
and Economics from Rhodes College in Memphis in 1982.
EDWARD F. CARROLL
Mr. Carroll joined Gintel Asset 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.
R. BAXTER BROWN
Mr. Brown was an original partner of Robert Gintel and co-founding
partner of Gintel & Co. After an absence of seventeen years during which he was
Chief Executive Officer of Baxter Brown & Company and Brown Asset Management, he
rejoined the Gintel Group. Mr. Brown is Senior Vice President of Gintel Asset
Management Inc. and a General Partner of Gintel & Co. He began his career in
1956 with the NYSE firm of J.C. Bradford & Co. and became a general partner of
that firm. He holds a B.A. degree in Economics and Business Administration from
Vanderbilt University.
E. CHARLES JALENAK
Mr. Jalenak joined Gintel Asset Management in 1996 as Vice President
after serving as Chief Investment Officer of a family-owned investment company.
He has extensive experience in a wide variety of investment disciplines,
including equities, fixed income, real estate and venture capital. Previously,
Mr. Jalenak worked in the investment banking departments at Merrill Lynch & Co.
(New York) and Morgan Keegan & Co. (Memphis), focusing on mergers, acquisitions,
and debt and equity financing. Mr. Jalenak received a B.S. degree from Tulane
University and an M.B.A. degree from the Wharton School of the University of
Pennsylvania.
<PAGE> 14
<TABLE>
<CAPTION>
GINTEL FUND TRUSTEES AND OFFICERS
- ---------------------------------------------------------------------------------------
<S> <C>
Robert M. Gintel Chairman, Trustee, and Chief Executive Officer
Chairman and Chief Executive Officer, Gintel Asset Management, Inc.;
Senior Partner, Gintel & Co. Limited Partnership; Vice Chairman and Director,
XTRA Corporation.
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.
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.
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.
Stephen G. Stavrides Trustee, President, and Treasurer
President, Gintel Asset Management, Inc.; General Partner and Chief
Operating Officer, Gintel & Co. Limited Partnership.
Donna K. Grippe Secretary and Assistant Treasurer
INVESTMENT ADVISOR GINTEL GROUP
Gintel Asset 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>
