<PAGE> 1
GINTEL FUND
The investment objective is to achieve capital appreciation through investing in
equities. The minimum initial investment in the Gintel Fund is $5,000, except
for IRA's and Keogh accounts where the minimum initial purchase is $2,000. There
is no minimum on additional investments.
<TABLE>
<CAPTION>
SUMMARY OF INVESTMENT RESULTS
<S> <C>
1998 (6 months) 2.6%
1997 29.2%
1996 31.0%
1995 31.0%
1994 -16.5%
1993 2.0%
1992 24.7%
1991 15.6%
1990 -6.7%
1989 23.8%
1988 29.4%
1987 -14.3%
1986 20.8%
1985 20.0%
1984 -2.6%
1983 34.3%
1982 34.1%
1981 (6/10/81-12/31/81) 7.6%
Average Annual Total
Return Since Inception 15.6%
</TABLE>
*Investment results are net of expenses, with dividends and capital gains
reinvested.
Past results offer no assurance as to future performance. The investment return
and principal value of an investment will fluctuate, so that an investor's
shares when redeemed may be worth more or less than their original cost. The
Fund's prospectus contains more complete information and should be read
carefully.
<PAGE> 2
Fellow Shareholders: June 30, 1998
Strong investment gains in the month of April were more than offset by price
declines in May and June, so that Gintel Fund's net asset value per share
increased only 2.6% by the end of the first half of 1998, after having risen
5.3% by the end of the first quarter. By comparison, the S&P 500 Index rose
17.6%, while the Russell 2000 Index increased by only 4.9% for the same six
month period.
At quarter-end, $39.4 million, or 21.6% of the Fund's portfolio, was held in
cash equivalents awaiting reinvestment. Also, during the first six months, sales
of stocks held in the portfolio resulted in net realized capital gains of $27.7
million, of which $21.5 million were long-term capital gains, taxable at only
20% capital gain tax rates after dividend distribution to our shareholders, and
$6.2 million were short-term capital gains, taxable at ordinary income tax
rates. By year-end, we would expect to have realized some offsetting capital
losses in the Fund's portfolio to ease the tax burden for the benefit of our
taxpaying shareholders.
Last January we ventured to predict that we would experience some of our best
gains in 1998 from our investments in Green Tree Financial, Nobel Education and
Checkpoint Systems. In fact, we experienced substantial gains from Green Tree
Financial, all of which have been realized, and Nobel Education has appreciated
more than 70% since year-end. However, Checkpoint Systems is a stock which has
stumbled once again and it continues to penalize our current investment results,
as have Capstead Mortgage and Chart Industries. Milestone Scientific is a new
investment which has been particularly disappointing, and costly to us as well;
some shares may be sold by year-end to offset the substantial taxable short-term
gains already in the portfolio.
Checkpoint Systems, after meeting great initial success in gaining market share
and building rapidly growing revenues in the radio frequency electronic article
surveillance industry to thwart shop-lifting in retail stores, has suddenly run
into aggressive marketing tactics from its major competitor. As a result,
recently-announced price increases have been put off and competitive bidding for
new business has intensified. The bottom line is that the company's hope for
profit acceleration from current levels has been pushed out to 1999, with 1998
looking like a flat to slightly down year.
Although we sold over 60% of our Capstead Mortgage holdings at substantial gains
in 1997 and 1998, the remaining investment has been adversely impacted by the
current low interest rate environment, mortgage prepayments, and a flat yield
curve, all of which have combined to cause Capstead's fundamentals to
deteriorate more extensively than either management or we expected. We are
trying to evaluate the situation to determine a correct, long-term course of
action for the shares remaining in our portfolio, including consideration of
replacing some of the stock we sold earlier at much higher prices.
Chart Industries nearly doubled in price from mid-January to mid-April, and we
sold off a significant portion of our holdings on that price run-up, but the
stock subsequently gave back nearly all of its
<PAGE> 3
gains, giving us an opportunity in July to repurchase some of the shares we sold
at significantly higher prices earlier this year.
We also reduced our substantial position in Mercury General, an insurance
company which is doing very well, but whose stock has appreciated over 210%
above our original cost. Also, we have maintained our very substantial position
in CheckFree Holdings Corporation, which presently accounts for nearly 27% of
the Fund's assets. We believe the pay-off we have been patiently waiting for
these past two years is at hand and that over the next 6-18 months, CheckFree
will be in a position to demonstrate a substantial, rapidly growing stream of
recurring revenues, income, and cash flow which we hope will command a premium
valuation in the stock market.
We believe the United States economy is in the latter stages of an economic
expansion that began in 1992. With inflation still hovering around the 2% level,
corporate operating profits have slowed significantly from the average mid-teen
percentage gains of recent years to a projected, modest 2% to 3% growth for all
of 1998. Due to strong consumer resistance, higher wage and healthcare costs
cannot easily be passed on through higher prices. Moreover, the growth we have
enjoyed from near-record employment and rising real consumer income has been
negatively impacted by the strong U.S. Dollar which has hurt the earnings of
multinational corporations and spurred the growth of imports. The economic
turmoil in Asia remains a major wild card, with the U.S. economy expected to be
impacted much more in the second half of 1998. While the outlook does not appear
as rosy as it has over the past several years, we continue to believe that some
of those corporations with strong earnings gains and growth prospects could be
rewarded with higher constant valuations than their peers. Nevertheless, we have
accepted large capital gains and hold a substantial cash equivalent reserve to
protect the portfolio from an unexpected market correction while we await any
buying opportunities that may present themselves in the meantime.
As always, we thank our shareholders for their continuing loyalty and patience.
Cordially,
/s/ Robert M. Gintel /s/ Cecil A. Godman, III /s/ Edward F. Carroll
- -------------------- ------------------------ ---------------------
Robert M. Gintel Cecil A. Godman, III Edward F. Carroll
Chairman Investment Manager Investment Manager
<PAGE> 4
<TABLE>
<CAPTION>
GINTEL FUND Statement of Net Assets As of June 30, 1998
(Unaudited)
NUMBER
OF MARKET
SHARES COST** VALUE
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
<S> <C> <C> <C>
TECHNOLOGY-RELATED (29.1%)
--------------------------
1,675,000 CheckFree Holdings Corporation* $28,626,136 $49,307,812
200,000 C-Cube Microsystems Inc.* 5,101,583 3,712,500
INSURANCE (16.7%)
-----------------
400,000 Mercury General Corporation 8,736,086 25,775,000
100,000 Conseco Inc. 5,114,062 4,675,000
MANUFACTURING & SERVICE (12.2%)
-------------------------------
400,000 Ogden Corporation 7,942,677 11,075,000
348,800 Chart Industries, Inc. 740,384 8,327,600
50,000 Johnson Controls, Inc. 1,195,850 2,859,375
SECURITY PROTECTION SYSTEMS (4.5%)
----------------------------------
575,000 Checkpoint Systems, Inc. 7,163,982 8,121,875
MORTGAGE BANKING (2.6%)
-----------------------
565,000 Capstead Mortgage Corporation 6,385,421 4,731,875
MEDICAL EQUIPMENT (2.2%)
------------------------
725,000 Milestone Scientific Inc.* 10,159,140 3,942,188
EDUCATION (2.0%)
----------------
400,000 Nobel Education Dynamics, Inc. 3,044,821 3,600,000
COPPER PRODUCER (1.6%)
----------------------
50,000 Phelps Dodge Corporation 2,992,527 2,859,375
SAVINGS & LOAN (1.5%)
---------------------
80,000 Charter One Financial Corporation 240,937 2,695,000
BROADCAST EQUIPMENT (1.3%)
--------------------------
100,000 Vertex Communications Corporation* 1,550,000 2,350,000
BEVERAGES/FOOD (0.9%)
---------------------
40,000 PepsiCo. Inc. 643,671 1,647,500
Miscellaneous Securities*** (3.0%) 4,577,617 5,541,250
Imputed Brokerage Commission on
Securities Owned 357,000
- -----------------------------------------------------------------------------------------------------------------------------
Total Common Stock (77.4%) 94,571,894 141,221,350
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
GINTEL FUND Statement of Net Asset (continued) As of June 30, 1998
(Unaudited)
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENTS
<S> <C> <C> <C>
6,000,000 American Express Credit Corporation
5.55% due 7/29/98 6,000,000 6,000,000
6,000,000 General Motors Acceptance Corporation
5.59% due 8/6/98 6,000,000 6,000,000
6,000,000 Associates Corporation of North America
5.53% due 7/10/98 6,000,000 6,000,000
6,000,000 Chevron USA Inc
5.58% due 7/10/98 6,000,000 6,000,000
6,000,000 General Electric Capital Corporation
5.57% due 7/9/98 6,000,000 6,000,000
5,000,000 General Electric Capital Services Corporation
5.57% due 7/23/98 5,000,000 5,000,000
4,438,000 Chase Securities, Inc. Repurchase Agreement
5.40% due 7/1/98 (Collateralized by U. S. 4,438,000 4,438,000
Government Obligations)
- -----------------------------------------------------------------------------------------------------------------------------
Total Cash Equivalents (21.6%) 39,438,000 39,438,000
- -----------------------------------------------------------------------------------------------------------------------------
Total Investments (99.0%) $134,009,894 180,659,350
============
Other assets net of liabilities (1.0%) 1,757,695
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Applicable to Outstanding Shares (100.0%) $ 182,417,045
=============================================================================================================================
Net asset value per share--based on 8,165,943 shares
of beneficial interest (offering and redemption price) $ 22.34
=============================================================================================================================
</TABLE>
* Non-income producing investments
** Cost basis for Federal income tax purposes
*** Includes seven investments, some of which are non-income producing
investments.
See notes to financial statements.
<PAGE> 6
<TABLE>
<CAPTION>
GINTEL FUND Statement of Operations June 30, 1998
(Unaudited)
<S> <C> <C>
INVESTMENT INCOME:
Dividends $1,512,410
Interest 558,356
---------
Total investment income 2,070,766
EXPENSES:
Investment advisory fee 921,992
Administrative expense 596,971
Other expenses 27,765
-----------
Total expenses 1,546,728
-----------
NET INVESTMENT INCOME 524,038
NET REALIZED GAIN ON INVESTMENTS 27,151,142
NET DECREASE IN UNREALIZED APPRECIATION OF INVESTMENTS (23,069,655)
------------
NET GAIN ON INVESTMENTS 4,081,487
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,605,525
===========
</TABLE>
See notes to financial statements.
<PAGE> 7
<TABLE>
<CAPTION>
GINTEL FUND Statements of Changes in Net Assets (Unaudited)
Six Months Year Ended
Ended 6/30/98 12/31/97
------------- --------
<S> <C> <C>
OPERATIONS:
Net investment income $ 524,038 $ 1,328,273
Net realized gain on investments 27,151,142 10,157,788
Net increase (decrease) in unrealized appreciation
of investments (23,069,655) 30,268,425
------------ -----------
Net increase from operations 4,605,525 41,754,486
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income -- (1,538,652)
Net realized gains from investment -- (10,812,017)
------------ -----------
Net decrease from distributions to shareholders -- (12,350,669)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 2,527,319 9,158,835
Reinvestment of dividends -- 11,013,433
Cost of shares repurchased (5,440,267) (16,757,312)
------------ -----------
Net increase (decrease) from capital share transactions (2,912,948) 3,414,956
Total Increase 1,692,577 32,818,773
Net Assets - Beginning of Year 180,724,468 147,905,695
------------ ------------
Net Assets - End of Period $182,417,045 $180,724,468
============ ============
NET ASSETS CONSIST OF:
Capital Stock $108,999,405 $111,912,353
Undistributed net investment losses (42,345) (566,383)
Undistributed net realized gains (losses)
from security transactions 26,557,529 (593,613)
Unrealized appreciation on investments 46,902,456 69,972,111
------------ ------------
$182,417,045 $180,724,468
============ ============
</TABLE>
See notes to financial statements.
<PAGE> 8
<TABLE>
<CAPTION>
GINTEL FUND Condensed Financial Information (Unaudited)
(Per Share Income and Capital Changes)
Year Ended December 31
----------------------------------------------------
Six Months
Ended 6/30/98 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 21.78 $18.10 $15.37 $12.46 $15.11
Income from
Investment Operations
Net investment income (loss) .06 .12 .37 (.01) .04
Net realized and unrealized
gain (loss) on securities .50 5.13 4.40 3.86 (2.53)
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment Income .56 5.25 4.77 3.85 (2.49)
- -----------------------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income -- .15 .35 .01 .04
Capital gains -- 1.42 1.69 .93 .12
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions 1.57 2.04 .94 .16
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 22.34 $21.78 $18.10 $15.37 $12.46
=============================================================================================================================
Total Return 2.6% 29.2% 31.0% 31.0% -16.5%
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period $182,417,045 $180,724,468 $147,905,695 $96,738,857 $88,277,270
Ratio of operating expenses to
average net assets* 1.7% 1.8% 1.8% 2.3% 2.4%
Ratio of net investment
income (loss) to average net assets .6% .8% 2.2% (.1%) .3%
Portfolio turnover rate 39.7% 52.0% 61.4% 55.4% 69.6%
Average commission rate paid * * * * *
Shares outstanding, end of period 8,165,943 8,295,837 8,171,707 6,295,777 7,085,466
</TABLE>
* The Fund's expense ratio for 1994 - 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
the six months ended June 30, 1998, was $.0943 and for 1997 and 1996 was
$.0845 and $.0771 per share, respectively.
See notes to financial statements.
<PAGE> 9
GINTEL FUND Notes to Financial Statements June 30, 1998
(Unaudited)
(NOTE A) ORGANIZATION:
The Gintel Fund (the "Fund") is a Massachusetts business trust formed under the
laws of the Commonwealth of Massachusetts with authority to issue an unlimited
number of shares of beneficial interest.
(NOTE B)--SIGNIFICANT ACCOUNTING POLICIES:
1. Security Valuation:
Investments in securities are valued at the last reported sales price on the
last business day of the period, or in the absence of a recorded sale, at the
mean of the closing bid and asked price on that date. Short-term investments are
valued at cost which approximates market value.
2. Federal Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable income and long-term gains to its shareholders.
Therefore, only a nominal Federal income tax provision is required.
3. Other:
As is common in the industry, security transactions are accounted for on the
trade date. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Realized gain or loss on security transactions is determined on the basis of
first-in, first-out or specific identification.
(NOTE C)--INVESTMENT ADVISORY AGREEMENT:
The Fund's Investment Advisory Agreement with Gintel Asset Management, Inc., a
related party, provides for the annual fee of 1% based on the daily value of the
Fund's net assets.
(NOTE D)--ADMINISTRATIVE SERVICES AGREEMENT:
The Fund's Administrative Services Agreement provides that in consideration for
the services provided by Gintel & Co., the Fund's Distributor and a related
party, and the payment by the Distributor of substantially all of the Fund's
expenses, including but not limited to brokerage commissions and operating
expenses (but excluding the Investment Advisor's fees, the fees paid to
non-interested Trustees, certain transaction costs, interest, taxes and
extraordinary expenses), the Distributor would receive an Administrative
Services Fee. The Distributor receives a fee of 1.25% of the first $50 million
of the average daily net assets of the Fund, 1.125% of the next $50 million of
the average daily net assets and 1.0% of the average daily net assets in excess
of $100 million.
(NOTE E)--IMPUTED COMMISSIONS:
The Fund provides for imputed brokerage commissions to be extracted from the
Administrative Services Fee and to be applied to the cost of securities sold and
held. For the six months ended June 30, 1998, the Fund has estimated imputed
brokerage commissions to be $418,000 which decreased administrative expense, and
thereby increased net investment income and unrealized capital gains by $418,000
and $93,000, respectively, and decreased realized capital gains by $511,000.
<PAGE> 10
GINTEL FUND Notes to Financial Statements -- continued June 30, 1998
(Unaudited)
(NOTE F)--LINE OF CREDIT:
The Fund has a bank line of credit of $15,000,000. Interest is payable at the
Prime Rate. Loans are collateralized by securities owned by the Fund. At June
30, 1998, the Fund had no outstanding borrowings.
(NOTE G)--OTHER MATTERS:
1. Investments
<TABLE>
<S> <C>
Unrealized appreciation at June 30, 1998 $ 56,914,951
Unrealized depreciation at June 30, 1998 (9,908,495)
Imputed commissions on securities owned ( 357,000)
------------
$46,649,456
============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1998
----------------
<S> <C>
Purchases of securities other than short-term investments $33,014,054
Sales of securities other than short-term investments $77,149,223
</TABLE>
2. Capital Stock (in shares):
<TABLE>
<CAPTION>
Six Month Ended Year Ended
June 30, 1998 December 31, 1997
--------------- -----------------
<S> <C> <C>
Shares issued 112,002 426,934
Shares reinvested -- 516,578
Shares repurchased (241,896) (819,382)
-------- ---------
Net increase (decrease) (129,894) 124,130
========= =========
</TABLE>
<PAGE> 11
GINTEL FUND TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
Robert M. Gintel Chairman, Trustee, and Chief Executive Officer Chairman
and Chief Executive Officer, Gintel Asset Management,
Inc.; Senior Partner, Gintel & Co. Limited Partnership;
Vice Chairman and Director, XTRA Corporation.
Thomas H. Lenagh Trustee
Financial Consultant; formerly Chairman and Chief
Executive Officer of Greiner Engineering Co.; Director,
Adams Express Co., USLife Corp., ICN Biomedics, Inc.,
SCI Systems, Inc., Irvine Sensors Corp., CML Inc.,
Clemente Global, Rexhall Inc.
Francis J. Palamara Trustee
Business Consultant; previously Director and Executive
Vice President of ARA Services, Inc.; formerly
Executive Vice President and Chief Operating Officer of
the New York Stock Exchange, Inc.; Director, Glenmede
Fund, XTRA Corporation.
Russel R. Taylor Trustee
Associate Professor of Management and Marketing,
Director of H.W. Taylor Institute of Entrepreneurial
Studies, College of New Rochelle; Founder of Russel
Taylor, Inc.
Stephen G. Stavrides Trustee, President, and Treasurer
President, Gintel Asset Management, Inc.; General
Partner and Chief Operating Officer, Gintel & Co.
Limited Partnership.
Donna K. Grippe Secretary and Assistant Treasurer
<TABLE>
<S><C>
INVESTMENT ADVISOR GINTEL GROUP
Gintel Asset Management, Inc. Chase Global Funds Services Company
6 Greenwich Office Park P. O. Box 2798
Greenwich, CT 06831-5197 Boston, MA 02208-2798
203 622-6400 800 344-3092
</TABLE>
