<PAGE> 1
As filed via EDGAR with the Securities and Exchange Commission on May 1, 1998
Registration No. 2-70207
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. 21 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 24 [ X ]
(Check appropriate box or boxes.)
GINTEL FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
6 Greenwich Office Park
Greenwich, Connecticut 06831
(800) 243-5808 or
(203) 622-6400
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER
Registrant's Telephone Number, including Area Code (203) 622-6400
Robert M. Gintel
Chief Executive Officer
Gintel Fund
6 Greenwich Office Park
Greenwich, Connecticut 06831
(800) 243-5808 or
(203) 622-6400
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copies to:
Susan J. Penry-Williams, Esq.
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
--------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1)
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2)
[X] ON MAY 1, 1998 PURSUANT TO PARAGRAPH (b)
[ ] ON ( ) PURSUANT TO PARAGRAPH (a)(1)
[ ] ON ( ) PURSUANT TO PARAGRAPH (a)(2) RULE 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
<PAGE> 2
GINTEL FUND
REGISTRATION STATEMENT ON FORM N-1A
CROSS-REFERENCE SHEET
FORM N-1A
ITEM NUMBER
PART A PROSPECTUS CAPTION
1. Cover Page
2. Expenses
3. Financial Highlights; Investment
Performance
4. Cover Page; The Fund; Investment Objective
and Policies
5. (a) Management
(b)-(c) Investment Advisor and Investment Advisory Agreement
(d) Administrative Services Agreement
(e) Custodian, Transfer Agent and Dividend Paying Agent
(f) Expenses; Investment Advisor and Investment Advisory
Agreement
(g) Brokerage Allocation
5A. (a) Investment Performance
(b) Other Information
6. (a) Organization and Description of Shares of the Fund
(b) Cover Page
(c)-(d) Organization and Description of Shares of the Fund
(e) Cover Page
(f)-(g) Tax Matters
(h) *
7. (a-c) Purchase of Shares
(d) Cover Page; Purchase of Shares
(e) Expenses
8. (a-c) Redemption of Shares
9. *
-i-
<PAGE> 3
STATEMENT OF ADDITIONAL
PART B INFORMATION CAPTION
10. Cover Page
11. Table of Contents
12. *
13. (a-c) Investment Objective and Policy; Investment
Restrictions
14. (a-b) Management
(c) *
15. (a-b) Investment Advisor and Investment Advisory
Agreement
(c) Management
16. (a-c) Investment Advisor and Investment Advisory
Agreement
(d-e) *
(f) *
(g) *
(h) See Part A - Custodian,
Transfer Agent and Dividend
Paying Agent; Counsel and
Auditors
(i) *
17. Portfolio Transactions and Brokerage
18. See Part A - Organization and
Description of Shares of the
Funds
19. (a) See Part A - Purchase of Shares; Redemption
of Shares
(b) Computation of Net Asset Value
(c) *
20. Tax Matters
21. Portfolio Transactions and Brokerage
22. Performance Information
23. Financial Statements
PART C
Information required to be included in Part C is set
forth under the appropriate Item, so numbered, in Part C to this Registration
Statement.
- --------
* Not applicable.
-ii-
<PAGE> 4
PROSPECTUS MAY 1, 1998
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, except for IRA and Keogh accounts where the minimum initial
purchase is $2,000. There is no minimum for additional investments. Minimum
individual initial investments may be waived for omnibus arrangements with
certain broker dealers. Gintel Asset Management, Inc. (the "Investment Advisor")
acts as investment advisor to the Fund.
OBJECTIVE-- To achieve capital appreciation by
investing in equities
SALES CHARGES-- No Sales Load
No 12b-1 Fees
Redemption Fees: 3% for the first
45 days
EXPENSE LIMITATION-- Advisory fees, brokerage
commissions, and operating expenses
are limited to a fixed percentage
of assets.
MINIMUM INVESTMENT-- $5,000 ($2,000 for IRA and Keogh
accounts)
ROUTINE SHAREHOLDER REPORTS-- We update shareholders on the
market and portfolio at least four
times a year, including Semi-Annual
and Annual Reports.
MANAGEMENT ALSO INVESTS IN THE FUND-- As of March 31, 1998, the employees
of the Advisor and their families
owned 28.4% 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, 1998, 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 NOR HAS THE SECURITIES AND EXCHANGE
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
12b-1 Fees..................................................................NONE
Redemption Fee on Shares Held 45 days or less
(as a percentage of assets redeemed) .....................................3.00%
OPERATING EXPENSES FOR YEAR ENDED DECEMBER 31, 1997
(as a percentage of average net assets)
Management Fees 1.00%
Other Expenses* .82%
12b-1 Fees --
-----
Total Fund Operating Expense 1.82%
=====
* Excludes imputed brokerage commissions which are paid by the Distributor 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 $ 19 $57 $99 $214
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 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.
3
<PAGE> 6
FINANCIAL HIGHLIGHTS
The following Financial Highlights table has been examined by Richard
A. Eisner & Company, LLP, independent auditors, whose report dated January 22,
1998, expresses an unqualified opinion thereon. This table should be read in
conjunction with the financial statements, related notes, and report thereon 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.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
YEAR
ENDED 12/31
-----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992* 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of year $ 18.10 15.37 $ 12.46 $ 15.11 $ 16.45 $ 13.48 $ 12.75
Income from
Investment Operations
Net Investment Income(loss) .12 .37 (.01) .04 (.06) .09 .32
Net realized and unrealized
gain(loss) on securities 5.13 4.40 3.86 (2.53) .37 3.23 1.66
-------- -------- -------- -------- -------- -------- --------
Total from Investment Income 5.25 4.77 3.85 (2.49) .31 3.32 1.98
-------- -------- -------- -------- -------- -------- --------
Less: Distributions
Net investment income .15 .35 .01 .04 -- .10 .31
Capital gains 1.42 1.69 .93 .12 1.65 .25 .94
-------- -------- -------- -------- -------- -------- --------
Total Distributions 1.57 2.04 .94 .16 1.65 .35 1.25
-------- -------- -------- -------- -------- -------- --------
Net Asset Value,
End of Year $ 21.78 $ 18.10 $ 15.37 $ 12.46 $ 15.11 $ 16.45 $ 13.48
======== ======== ======== ======== ======== ======== ========
Total Return 29.2% 31.0% 31.0% -16.5% 2.0% 24.7% 15.6%
-------- -------- -------- -------- -------- -------- --------
Ratios/Supplemental Data
Net assets, end of year (000) 180,724 $147,906 $ 96,739 $ 88,277 $136,110 $164,620 $ 77,408
Ratio of operating expense to
average net assets 1.8%** 1.8%** 2.3%** 2.4%** 2.2%** 1.7%** 1.4%
Ratio of net investment
income (loss) to average net assets .8% 2.2% (.1%) .3% (.3%) .9% 1.9%
Portfolio turnover rate 52.0% 61.4% 55.4% 69.6% 50.8% 56.0% 66.3%
Average commission rate paid ** ** ** ** ** ** $ .09
Shares outstanding at end
of year (000) 8,296 8,172 6,296 7,085 9,009 10,010 5,741
</TABLE>
<TABLE>
<CAPTION>
YEAR
ENDED 12/31
-------------------------------
1990 1989 1988
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value,
Beginning of year $ 14.18 $ 12.70 $ 9.82
Income from
Investment Operations
Net Investment Income(loss) .46 1.10 .28
Net realized and unrealized
gain(loss) on securities (1.40) 1.82 2.60
-------- -------- --------
Total from Investment Income (.94) 2.92 2.88
-------- -------- --------
Less: Distributions
Net investment income .49 1.44 --
Capital gains -- -- --
-------- -------- --------
Total Distributions .49 1.44 --
-------- -------- --------
Net Asset Value,
End of Year $ 12.75 $ 14.18 $ 12.70
======== ======== ========
Total Return -6.7% 23.8% 29.4%
-------- -------- --------
Ratios/Supplemental Data
Net assets, end of year (000) $ 79,340 $ 94,566 $ 83,214
Ratio of operating expense to
average net assets 1.5% 1.4% 1.6%
Ratio of net investment
income (loss) to average net assets 3.1% 7.4% 2.5%
Portfolio turnover rate 75.0% 65.4% 85.4%
Average commission rate paid $ .09 $ .07 $ .12
Shares outstanding at end
of year (000) 6,223 6,667 1,250
</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 for 1992-1995 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.
4
<PAGE> 7
DEBT INFORMATION
<TABLE>
<CAPTION>
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>
1997 .................. -0- -0- -0- -0-
1996 .................. -0- -0- -0- -0-
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
</TABLE>
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.
5
<PAGE> 8
SUMMARY OF ANNUAL INVESTMENT RESULTS SINCE INCEPTION
(assuming reinvestment of dividends)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
29.2% 31.0% 31.0% -16.5% 2.0% 24.7% 15.6% -6.7% 23.8%
</TABLE>
<TABLE>
<CAPTION>
1988 1987 1986 1985 1984 1983 1982 1981* CUMULATIVE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
29.4% -14.3% 20.8% 20.0% -2.6% 34.3% 34.1% 7.6% 856.6%
</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. 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 portion 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 of 1940, as amended (the "1940 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
6
<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, except for
IRA and Keogh accounts where the minimum initial purchase is $2,000. 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.
7
<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 Gintel 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, or (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
8
<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 regular monthly or quarterly redemptions made under the
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.
9
<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 Administrative 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:
NAME AND OFFICE PRINCIPAL OCCUPATION
ROBERT GINTEL,* Chairman and Chief Executive Officer of Gintel Asset
Chairman of the Board, Management, Inc. since 1971; Senior Partner of Gintel
Chief Executive Officer & Co. Limited Partnership, a member firm of the New
and Trustee York Stock Exchange, Inc. and an associate member
firm of the American Stock Exchange, Inc. since June
1969; 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.
THOMAS H. LENAGH, Financial Consultant; formerly Chairman and Trustee,
Trustee, Chief Executive Officer of Greiner Engineering Co.
1 Brookside Drive (consulting engineers); financial advisor to various
Westport, CT 06880 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.
FRANCIS J. PALAMARA, Business Consultant; previously Director and
Trustee, Executive Vice President of ARA Services, Inc.
3110 E. Maryland Ave. (provides various services for industry, institutions
Phoenix, AZ 85064 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) and
Glenmede Fund (a regulated investment company);
trustee of the Fund since January 1981.
10
<PAGE> 13
NAME AND OFFICE PRINCIPAL OCCUPATION
RUSSEL R. TAYLOR, Associate Professor of Management, College
Trustee, of New Rochelle, since 1977; founder and
31 Indian Point Lane Director of Russel Taylor, Inc. since 1963;
Riverside, CT 06878 trustee of the Fund since December 1985.
STEPHEN G. STAVRIDES,* Director, President and Treasurer of Gintel
Trustee, Chief Operating Asset Management, Inc.; General Partner of
Officer, President and Treasurer Gintel & Co. Limited Partnership; President
and Treasurer of the 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 since
December 1981.
DONNA K. GRIPPE Secretary and Assistant Treasurer;
Secretary and Assistant previously, Manager of the Fund Accounting
Treasurer for American Investors Fund, Inc., American
Investors Income Fund, Inc., and American
Investors Money Market Fund, Inc.
On March 31, 1998, Robert M. Gintel and his family, trustees of the
Fund and employees of the Investment Advisor and Gintel & Co. owned directly or
beneficially 2,341,019 shares with a market value of $53,702,976 representing
28.4% 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 IRAs set up
under a Simplified Employee Pension Plan ("SEP-IRAs") 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 does not
and should not be relied upon to provide tax advice for each investor.
INVESTMENT ADVISOR AND INVESTMENT ADVISORY AGREEMENT
Gintel Asset Management, Inc. (formerly 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.
11
<PAGE> 14
The Investment Advisor receives a fee from the Fund, calculated daily
and paid monthly in arrears, for the performance of its services at an annual
rate of 1% of the average daily net assets of the Fund. The fee is accrued daily
for the purposes of determining the offering and redemption price of the Fund's
shares.
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 Asset 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. 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 as well as other television and radio
programs.
CECIL A. GODMAN, III joined the Gintel organization in 1985. He serves
as a director of Gintel Asset Management, Inc. and is a General Partner of
Gintel & Co. Before joining Gintel Asset 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 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 39-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 are not to the detriment 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 Gintel & Co. (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 based on average daily net assets. 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.
Under the Agreement, the Distributor receives an annual fee, paid monthly in
arrears, of 1.25% of the first $50 million of the average daily net assets,
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.
12
<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 for
federal income tax purposes 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 its 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.
If the Fund fails to satisfy any of the Code requirements for
qualification as a regulated investment company, it will be taxed at regular
corporate tax rates on all its taxable income (including capital gains)
without any deduction for distributions to shareholders, and distributions to
shareholders will be taxable as ordinary dividends (even if derived from the
Fund's net long-term capital gains) to the extent of the Fund's current and
accumulated earnings and profits.
Distributions by the Fund of its net investment income and the excess,
(including foreign currency gains and losses) 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, shareholders take distributions into account
in the year in which they are made. However, shareholders are required to treat
certain distributions made during January 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.
Investors should carefully consider the tax implications of purchasing
shares just prior to the record date of any ordinary income dividend or capital
gain dividend. Those investors purchasing shares just prior to an ordinary
income or capital gain dividend 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 and such dividend
economically constitutes a return of capital to such investors.
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.
13
<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 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 considerations
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 investment 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, & 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.
14
<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.
[GINTEL FUND GRAPH]
GINTEL FUND
Average Annual Rates of Return
One (1) Year 29.2%
Five (5) Years 13.6%
Ten (10) Years 15.1%
Investment results are net of expenses, with dividends and capital gains
reinvested. The Russell 2000 excludes the 1,000 largest companies included in
the Russell 3000. The average capitalization of companies included in the
Russell 2000 is $467.3 million. The Russell 3000 is a weighted index of the
3,000 largest U.S. companies based on total market capitalization.
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.
15
<PAGE> 18
TABLE OF CONTENTS
PAGE
Expenses 3
Financial Highlights 4
The Fund 5
Investment Performance 5
Investment Objective and Policies 6
Purchase of Shares 7
Redemption of Shares 8
Management 10
Tax-Sheltered Retirement Plans 11
Investment Advisor
and Investment Advisory Agreement 11
Administrative Services Agreement 12
Brokerage Allocation 13
Tax Matters 13
Organization and Description of Shares
of the Fund 14
Custodian, Transfer Agent
and Dividend Paying Agent 14
Counsel and Auditors 14
Other Information 15
INVESTMENT ADVISOR
Gintel Asset 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
GINTEL FUND
PROSPECTUS
MAY 1, 1998
GINTEL GROUP
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
TOLL FREE
800 344-3092
<PAGE> 19
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
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, 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 Asset Management, Inc. (the "Investment Advisor")
at 6 Greenwich Office Park, Greenwich, CT 06831 or calling (203) 622-6400.
This Statement of Additional Information is related to the Fund's
Prospectus dated May 1, 1998.
TABLE OF CONTENTS
PAGE
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
Financial Statements..........................................................12
1
<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 35% 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;
(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 provision has been made for margin calls, termination of the loan,
reasonable servicing fees (including finder's fees), voting rights and dividend
rights;
(d) 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 $16,500 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 $2,500.
Set forth below is information regarding compensation paid the period
from January 1, 1997-December 31, 1997:
<TABLE>
<CAPTION>
Pension or Estimated Total
Retirement Annual Compensation
Name & Position Aggregate Benefits Accrued Benefits from
Compensation as Part Upon Gintel Fund
from Gintel Fund of Fund Expenses Retirement
<S> <C> <C> <C> <C>
Robert M. Gintel (Chairman & C.E.O.) - 0 - $ 0 $ 0 -0-
Thomas H. Lenagh (Trustee) $16,500 $ 0 $ 0 $16,500
Francis J. Palamara (Trustee & Chairman of Audit Committee) $19,000 $ 0 $ 0 $19,000
Stephen G. Stavrides (Trustee & President) - 0 - $ 0 $ 0 0-
Russel R. Taylor (Trustee) $16,500 $ 0 $ 0 $16,500
</TABLE>
As of March 31, 1998, trustees and officers as a group beneficially
owned 1,226,195 shares of the Fund's common stock which represented 15.3% 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 Asset Management, Inc., (formerly Gintel Equity Management,
Inc.), 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, calculated daily and paid
monthly in arrears, for the performance of its service at an annual rate of 1%
(.25% quarterly) of the average daily net assets of the Fund. 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.
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.
For the Fiscal year ended December 31, 1997, the Fund paid fees to the
Investment Advisor of $1,616,405. For the fiscal year ended December 31, 1996,
the Fund paid fees to the Investment Advisor of $1,147,450. For the fiscal year
ended December 31, 1995, the Fund paid fees to the Investment Advisor of
$928,954.
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 will
continues 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.
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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 calculated daily
and paid monthly in arrears based on average daily net assets during the
preceding month at an annual rate of 1.25% of the first $50 million of the
average daily net assets of the Fund; 1.125% of 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.
For the fiscal year ended December 31, 1997, the Fund paid fees to the
Distributor of $1,803,905. For the fiscal year ended December 31, 1996, the
Fund paid fees to the Distributor of $1,318,188. For the fiscal year ended
December 31, 1995, the Fund paid fees to the Distributor of $1,107,572.
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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 therefor. In addition, the Investment Advisor may consider sale of
shares of the 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.
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.
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COMPUTATION OF NET ASSET VALUE
The Fund determines the net asset value of its shares at the close of
the New York Stock Exchange (the "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
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
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 for
federal income tax purposes 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 will
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").
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<PAGE> 26
In general, gain or loss recognized by the Fund on the disposition of
an asset will be capital gain or loss. In addition, gain will be recognized as a
result of certain constructive sales, including short sales "against the
box." 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. 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 each of which the
Fund has not invested more than 5% of the value of the Fund's total assets in
securities of such issuer and 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.
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<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 its net
capital gain for each taxable year. The Fund currently intends to distribute any
such amounts. Net capital gain that is distributed and designated as a capital
gain dividend 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. The Code provides, however, that under certain conditions
only 50% (58% for alternative minimum tax purposes) 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"), 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. For purposes of the corporate AMT, 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, a corporate shareholder 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
may 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.
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.
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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 failed
to provide a correct taxpayer identification number, (2) who is subject to
backup withholding for failure properly 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 an "exempt recipient"( such
as a corporation).
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. Long-term capital gain recognized by an individual
shareholder will be taxed at the lowest rates applicable to capital gains if the
holder has held such shares for more than 18 months at the time of the sale.
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) generally
will apply in determining the holding period of shares. 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 applicable 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.
taxpayers.
In the case of foreign noncorporate shareholders, other than
corporations, 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 their 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 decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect.
10
<PAGE> 29
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies may 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:
P(1+T)(n) = 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 ten- year period December 31, 1987
through December 31, 1997 was as follows:
- ending redeemable value of initial $1,000 investment
pursuant to Securities and Exchange Commission rules:
$4,073
The total return of the Fund for the five-year period from December 31,
1992 through December 31, 1997 was as follows:
- ending redeemable value of initial $1,000 investment
pursuant to Securities and Exchange Commission rules:
$1,891
The total return of the Fund for the one-year period from December 31,
1996 through December 31, 1997 was as follows:
- ending redeemable value of initial $1,000 investment
pursuant to Securities and Exchange Commission rules:
$1,292
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
FINANCIAL STATEMENTS
The Financial Statements for the year ended December 31, 1997, are hereby
incorporated by reference from the Fund's 1997 Annual Report to Shareholders.
A copy of the Annual Report and this Statement of Additional Information will be
provided at no cost to all shareholders upon request.
12
<PAGE> 31
PART C
OTHER INFORMATION
ITEM 24 (a) FINANCIAL STATEMENTS
In Part A:
Financial Highlights for the years ended
December 31, 1988, 1989, 1990, 1991, 1992, 1993,
1994, 1995, 1996, and 1997.
In Part B:
Annual Report for the fiscal year ended December
31, 1997 is incorporated by reference into the
Statement of Additional Information from Rule
30D filing made by Registrant (Accession Number
0000950123-98-004334).
In Part C:
None
(b) Exhibits
EXHIBIT
NUMBER DESCRIPTION
EX-99.B1 - Form of Registrant's Declaration of Trust.*
EX-99.B2 - Form of Registrant's By-Laws.*
EX-99.B3 - None.
EX-99.B4 - Specimen Security.*
EX-99.B5 - Form of Investment Advisory Agreement.*
EX-99.B6 - Form of Distribution Agreement.*
EX-99.B7 - None.
- --------
* Previously filed with the Fund's Post-Effective Amendment No. 12 on
September 9, 1986.
C-1
<PAGE> 32
EXHIBIT
NUMBER DESCRIPTION
EX-99.B8 - Custodian Agreement and Transfer Agency
Agreement*
EX-99.B9 - None.
EX-99.B10 - Consent of Kramer, Levin, Naftalis & Frankel.
EX-99.B11 - Consent of Richard A. Eisner & Company, LLP.
EX-99.B12 - None.
EX-99.B13 - None.
EX-99.B14 - Forms of Retirement Plans.*
EX-99.B15 - Form of Rule 12b-1 Plan.**
EX-99.B16 - Calculation of Total Return***
EX-27 - Financial Data Schedule.*
- --------
* Previously filed with the Fund's Pre-Effective Amendment No. 2 on May
20, 1981.
** Previously filed with the Fund's Post-Effective Amendment No. 12 on
September 9, 1986.
*** Previously filed with the Fund's Post-Effective Amendment No. 14 on
April 29, 1988.
C-2
<PAGE> 33
ITEM 25. PERSONS CONTROLLED OR UNDER COMMON CONTROL WITH
REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
NUMBER OF RECORD HOLDERS
TITLE CLASS MARCH 31, 1998
Shares of beneficial 1,962
interest, par value
.01 per share
ITEM 27. INDEMNIFICATION
Reference is hereby made to Article V of the
Registrant's Declaration Trust.
The Registrant and its officers are insured under a
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT
ADVISER
See "Management" in the Prospectus.
ITEM 29. PRINCIPAL UNDERWRITER
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES WITH POSITION AND OFFICES
BUSINESS ADDRESS* PRINCIPAL UNDERWRITER WITH REGISTRANT
- ----------------- --------------------- ---------------
<S> <C> <C>
Robert M. Gintel General Partner Chairman, Trustee and
President
Stephen Stavrides General Partner Trustee, President and
Treasurer
Cecil A. Goodman III General Partner None
Ellen J. Gerstein General Partner None
Debra Ginsburg General Partner None
Edward F. Carroll General Partner None
R. Baxter Brown General Partner None
(c) Not Applicable
</TABLE>
- --------
* 6 Greenwich Office Park, Greenwich, Connecticut 06831.
C-3
<PAGE> 34
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Gintel Asset Management, Inc., 6 Greenwich Office
Park, Greenwich, Connecticut 06831 will maintain physical possession of each
such account, book or other document of the Registrant, except for those
maintained by the Fund's Custodian, The Chase Manhattan Bank, 3 Chase Metrotech
Center, Brooklyn, New York 11245.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
The Fund undertakes that whenever ten or more
shareholders of record of the Fund who have been such for at least six months
preceding the date of application, and who hold in the aggregate either shares
having a net asset value of at least $25,000 or at least 1 percent of the
outstanding shares of the Fund, whichever is less, shall apply to the directors
or trustees of the Fund in writing, stating that they wish to communicate with
the other shareholders with a view to obtaining signatures to a request for
meeting pursuant to Section 16(c) of the Investment Company Act and accompanied
by a form of communication and request which they wish to transmit, the Fund
shall thereafter comply in all respects with the provisions of said Section
16(c) insofar as they relate to such shareholder communications.
C-4
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the Undersigned,
thereunto duly authorized, in the City of Greenwich in the State of Connecticut
on the 28th day of April, 1998.
GINTEL FUND
By: /s/ Robert M. Gintel
------------------------------------------
Robert M. Gintel
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Robert M. Gintel Chief Executive Officer, April 28, 1998
- -------------------------
Robert M.Gintel Chairman of the Board
and Trustee (Principal
Executive Officer)
* Trustee April 28, 1998
- -------------------------
Thomas H. Lenagh
* Trustee April 28, 1998
- -------------------------
Francis J. Palamara
* Trustee April 28, 1998
- -------------------------
Russel R. Taylor
* Trustee, Vice President, April 28, 1998
- -------------------------
Stephen G. Stavrides Secretary and Treasurer
(Principal Financial and
Accounting Officer)
*By /s/ Susan Penry-Williams April 28, 1998
------------------------
Susan Penry-Williams Attorney-in-Fact,
pursuant to powers of attorney
previously filed with the Securities and
Exchange Commission
</TABLE>
<PAGE> 36
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
99.B10 -- Consent of Kramer Levin, Naftalis & Frankel.
99.B11 -- Consent of Richard A. Eisner & Company, LLP.
<PAGE> 1
(KRAMER, LEVIN, NAFTALIS & FRANKEL LETTERHEAD)
April 28, 1998
Gintel Fund
6 Greenwich Office Park
Greenwich, CT 06831
Re: Post-Effective Amendment No. 21 to
Registration Statement on Form N-1A
File No. 2-70207
-----------------------------------
Gentlemen:
We hereby consent to the reference to our firm as counsel in this
Registration Statement On Form N-1A.
Very truly yours,
/s/ Kramer, Levin, Naftalis & Frankel
<PAGE> 1
INDEPENDENT AUDITOR'S CONSENT
We hereby consent to the incorporation by reference in the Statement of
Additional Information of the post-effective amendment to the Registration
Statement (No. 2-70207) being filed under the Securities Act of 1933 and the
Investment Company Act of 1940 on Form N-1A by Gintel Fund of our report dated
January 22, 1998, relating to the statement of net assets of Gintel Fund as of
December 31, 1997, the related statements of operations for the year then
ended, 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 periods
indicated appearing in the Prospectus; we also consent to the reference to our
Firm under the captions "Condensed Financial Information" and "Counsel and
Auditors" in the Prospectus and "Shareholder Reports" in the Statement of
Additional Information.
Richard A. Eisner & Company, LLP
New York, New York
April 28, 1998
