<PAGE> 1
GINTEL
GINTEL
GINTEL FUND
ANNUAL REPORT TO
SHAREHOLDERS
DECEMBER 31, 1998
<PAGE> 2
GINTEL FUND
The investment objective is to achieve capital appreciation through
investing in equities. The minimum initial investment in the Gintel Fund
is $5,000, except for IRA's and Keogh accounts where the minimum initial
purchase is $2,000. There is no minimum on additional investments.
<TABLE>
<CAPTION> SUMMARY OF INVESTMENT RESULTS
<S> <C>
1998 -11.0%
1997 29.2%
1996 31.0%
1995 31.0%
1994 -16.5%
1993 2.0%
1992 24.7%
1991 15.6%
1990 -6.7%
1989 23.8%
1988 29.4%
1987 -14.3%
1986 20.8%
1985 20.0%
1984 -2.6%
1983 34.3%
1982 34.1%
1981 (6/10/81-12/31/81) 7.6%
</TABLE>
Average Annual Total
Return Since Inception 14.4%
*Investment results are net of expenses, with dividends and
capital gains reinvested.
Past results offer no assurance as to future performance. The
investment return and principal value of an investment will fluctuate,
so that an investor's shares when redeemed may be worth more or less
than their original cost. The Fund's prospectus contains more
complete information and should be read carefully.
<PAGE> 3
Fellow Shareholders: January 8, 1999
Gintel Fund had a disappointing year, with net asset value per
share declining by 11.0%. Although we experienced a material rebound
from the lows in early October, our key holdings did not recover in
price as much as we had hoped. We ended the year with $40 million, or
27.6% of the Fund's assets in cash equivalents.
The decline in the value of Gintel Fund in 1998 compares with
increases of 28.2% for the S&P 500 and a decline of 2.2% for the
Russell 2000. The significant difference in returns between the major
index and the broader index can be explained by the performance of the
largest capitalization stocks in the S&P 500. The top 50 stocks had a
total return of around 37%, while the other 450 stocks in the index
had a total return of around 2%. One of the reasons Gintel Fund's
performance diverged so greatly from that of the S&P 500 was that it
historically has not invested in these large companies which this year
so dominated the market. Moreover, year-end measurements are
arbitrary and can often be misleading. For example, if the year had
ended one month later, the fund would have reported a 5.1% increase in
net asset value; if the year had ended one month earlier, an 18%
decline would have been reported. In other words, non-diversified
funds, like ours, are especially vulnerable to the timing of
performance reporting.
Three key holdings-CheckFree (-13%), Mercury General (-21%),
and Checkpoint Systems (-29%) - recorded sharp declines last year.
The performance of Capstead Mortgage and Milestone Scientific also
contributed to last year's poor results. Although we have made a
certain number of important portfolio changes, we continue to hold on
to several core positions that we hope will do materially better in
the future.
We had achieved excellent results early in the year only to see
them evaporate during the late summer and early fall. We had been
saying for some time that we believed the market was overpriced, so
the decline that took place in early fall came as no surprise. What
did shock us, however, was that our core holdings became loss leaders
during the market's drop and that our large cash reserve could not
sufficiently cushion the fall.
Since the October bottom the market's recovery has been
phenomenal. Speculative frenzy in companies related to the Internet,
as well as substantial amounts of capital flowing into the largest
capitalized companies, have sustained the upturn. We seldom invest in
the former group because the valuations are astronomically high, and
the latter group appeared to offer little relative value. In fact, we
think the recent market activity in speculative stocks makes a mockery
of traditional investment concepts; it has become a dangerous game
that we cannot bring ourselves to play.
We believe that the economy will hold together during 1999, but
that the growth rate will be lower than in 1998, and we are still
concerned about the level of overall corporate profits. We are
seeking out depressed stocks to buy which offer an above-average
risk/reward opportunity.
On December 17, 1998, Gintel Fund shareholders of record as of
December 16, 1998, received a dividend of $3.01 per share,
representing ordinary income of $0.11 per share and
<PAGE> 4
long-term capital gains of $2.90 per share. We regret creating
substantial capital gains for our taxable shareholders in a year
when net asset value declined, but all the distributed capital gains
are subject to a maximum 20% tax rate.
We hope to report better investments in 1999 and so far we're
off to an excellent start. In the meantime, we thank our shareholders
for their continuing loyalty and support.
Sincerely,
/s/ ROBERT GINTEL /s/ CECIL A. GODMAN, III /s/ EDWARD F. CARROLL
Robert M. Gintel Cecil A. Godman, III Edward F.Carroll
Chairman Investment Manager Investment
Manager
<PAGE> 5
GINTEL FUND Statement of Net Assets As of December 31, 1998
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES COST** VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
TECHNOLOGY RELATED (30.5%)
--------------------------
1,650,000 CheckFree Holdings Corporation* $27,926,136 $38,568,750
200,000 C-Cube Microsystems Inc* 5,101,583 5,425,000
INSURANCE (19.1%)
-----------------
489,000 Mercury General Corporation 13,915,255 21,424,312
200,000 Conseco Inc. 5,918,750 6,112,500
SECURITY PROTECTION SYSTEM (8.1%)
---------------------------------
950,000 Checkpoint Systems, Inc. 10,987,848 11,756,250
MANUFACTURING & SERVICE (6.5%)
------------------------------
660,000 Chart Industries, Inc. 2,082,305 5,032,500
175,000 Ogden Corporation 3,327,434 4,385,937
EDUCATION (1.8%)
----------------
475,000 Nobel Learning Communities, Inc. 3,474,094 2,612,500
SAVINGS & LOAN (1.5%)
---------------------
78,750 Charter One Financial Corporation 225,820 2,185,313
BROADCAST EQUIPMENT (1.1%)
--------------------------
100,000 Vertex Communications Corporation* 1,550,000 1,587,500
ENTERTAINMENT (1.1%)
--------------------
50,000 Imax Corporation* 1,202,950 1,581,250
MEDICAL EQUIPMENT (0.5%)
------------------------
700,000 Milestone Scientific Inc.* 769,478 787,500
Miscellaneous Securities***(3.3%) 3,880,127 4,761,875
Imputed Brokerage Commissions on
Securities Owned 391,000
- -------------------------------------------------------------------------------------
Total Common Stocks (73.5%) 80,752,780 106,221,187
- -------------------------------------------------------------------------------------
<PAGE> 6
GINTEL FUND STATEMENT OF NET ASSETS (CONTINUED) AS OF DECEMBER 31, 1998
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH EQUIVALENTS
6,000,000 AMERICAN EXPRESS CREDIT CORPORATION
5.18% DUE 1/20/99 6,000,000 6,000,000
6,000,000 GENERAL MOTORS ACCEPTANCE CORPORATION
5.35% due 1/11/99 6,000,000 6,000,000
6,000,000 CHEVRON USA INC
5.27% DUE 1/8/99 6,000,000 6,000,000
6,000,000 GENERAL ELECTRIC CAPITAL CORPORATION
5.36% DUE 1/13/99 6,000,000 6,000,000
6,000,000 GENERAL ELECTRIC CAPITAL SERVICES CORPORATION
5.36% DUE 1/14/99 6,000,000 6,000,000
9,875,000 CHASE SECURITIES, INC. REPURCHASE AGREEMENT
4.45% DUE 1/4/99 (COLLATERALIZED BY U.S.
OBLIGATIONS) 9,875,000 9,875,000
- -------------------------------------------------------------------------------------------
TOTAL CASH EQUIVALENTS (27.6%) 39,875,000 39,875,000
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.1%) $120,627,780 146,096,187
============
LIABILITIES NET OF OTHER ASSETS (-1.1%) (1,676,692)
- -------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES(100.0%) $144,419,495
============================================================================================
Net asset value per share--based on 8,923,667 shares
of beneficial interest (offering and redemption price) $16.18
============================================================================================
</TABLE>
* Non-income producing investments
** Cost basis for Federal income tax purposes
*** Includes 10 investments, some of which are non-income producing
investments.
See notes to financial statements.
<PAGE> 7
Gintel Fund Statement of Operations Year End December 31,1998
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends $2,005,745
Interest 1,683,537
----------
Total investment income 3,689,282
EXPENSES:
Investment advisory fee 1,625,557
Administrative expense 1,081,057
Other expenses 58,513
---------
Total expenses 2,765,127
----------
NET INVESTMENT INCOME 924,155
NET REALIZED GAIN ON INVESTMENTS 23,071,911
NET DECREASE IN UNREALIZED APPRECIATION OF INVESTMENTS (44,250,703)
------------
NET LOSS ON INVESTMENTS (21,178,792)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($20,254,637)
=============
</TABLE>
See notes to financial statements.
<PAGE> 8
GINTEL FUND Statements of Changes in Net Assets Year Ended December 31,
<TABLE>
<CAPTION> 1998 1997
---- ----
<C> <C>
OPERATIONS:
<S>
Net investment income $924,155 $1,328,273
Net realized gain on investments 23,071,911 10,157,788
Net increase (decrease) in unrealized appreciation
of investments (44,250,703) 30,268,425
------------ ----------
Net increase (decrease) from operations (20,254,637) 41,754,486
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (856,082) (1,538,652)
Net realized gain on investments (23,063,460) (10,812,017)
------------ ------------
Net decrease from distribution to shareholders (23,919,542) (12,350,669)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 11,824,016 9,158,835
Reinvestment of dividends 15,707,752 11,013,433
Cost of shares repurchased (19,662,562) (16,757,312)
------------ ------------
Net increase from capital share transactions 7,869,206 3,414,956
Total Increase (Decrease) (36,304,973) 32,818,773
Net Assets - Beginning of Year 180,724,468 147,905,695
============ ===========
Net Assets - End of Year $144,419,495 $180,724,468
Net Assets consist of:
Capital Stock $119,781,559 $111,912,353
Undistributed net investment losses (498,310) (566,383)
Undistributed net realized losses
from security transactions (585,162) (593,613)
Unrealized appreciation on investments 25,721,408 69,972,111
------------- -------------
$144,419,495 $180,724,468
============= =============
</TABLE>
See notes to financial statements.
<PAGE> 9
GINTEL FUND Condensed Financial Information Year Ended December 31
(Per Share Income and Capital Changes)
<TABLE>
<CAPTION> 1998 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 (loss) from
Investment Operations
Net investment income (loss) .12 .12 .37 (.01) .04
Net realized and unrealized
gain (loss) on securities (2.71) 5.13 4.40 3.86 (2.53)
- ----------------------------------------------------------------------------------------------------------------
Total from Investment Income (Loss) (2.59) 5.25 4.77 3.85 (2.49)
- ----------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income .11 .15 .35 .01 .04
Capital gains 2.90 1.42 1.69 .93 .12
- ----------------------------------------------------------------------------------------------------------------
Total Distributions 3.01 1.57 2.04 .94 .16
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $16.18 $21.78 $18.10 $15.37 $12.46
=================================================================================================================
Total Return -11.0% 29.2% 31.0% 31.0% -16.5%
- -----------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of year $144,419,495 $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 61.4% 52.0% 61.4% 55.4% 69.6%
Average commission rate paid * * * * *
Shares outstanding, end of year 8,923,667 8,295,837 8,171,707 6,295,777 7,085,466
</TABLE>
*The Fund's expense ratio of 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 commission in their operating expenses,
but instead add them to the cost of securities purchased or deduct them from
the proceeds of securities sold. Beginning 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 years ended
December 31, 1998, 1997 and 1996 was $.0658, $.0845 and $.0771 per share,
respectively.
See notes to financial statements.
<PAGE> 10
GINTEL FUND Notes to Financial Statements December 31, 1998
(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 distribution to shareholders are
recorded on the ex-dividend date.
Realized gain or loss on security transactions is determined on the basis
of first-in, first-out or specific identification.
(NOTE C) - INVESTMENT ADVISORY AGREEMENT:
The Fund's Investment Advisory Agreement with Gintel Asset Management,
Inc., a related party, provides for the annual fee of 1% based on the daily
value of the Fund's net assets.
(NOTE D) - ADMINISTRATIVE SERVICES AGREEMENT:
The Fund's Administrative Services Agreement provides that in consideration
for the services provided by Gintel & Co., the Fund's Distributor and a
related party, and the payment by the Distributor of substantially all of
the Fund's expenses, including but not limited to brokerage commissions and
operating expenses (but excluding the Investment Advisor's fees, the fees
paid to non-interested Trustees, certain transaction costs, interest, taxes
and extraordinary expenses), the Distributor would receive an
Administrative Services Fee. The Distributor receives a fee of 1.25% of
the first $50 million of the average daily net assets of the Fund, 1.125%
of the next $50 million of the average daily net assets and 1.0% of the
average daily net assets in excess of $100 million.
(NOTE E) - IMPUTED COMMISSIONS:
The Fund provides for imputed brokerage commissions to be extracted from
the Administrative Services Fee and to be applied to the cost of securities
sold and held. For the year ended December 31, 1998, the Fund has
estimated imputed brokerage commissions to be $732,000 which decreased
administrative expense (and thereby increased net investment income)
unrealized capital losses, and realized capital gains by $732,000 $59,000,
and $791,000, respectively.
<PAGE> 11
GINTEL FUND Notes to Financial Statements (continued) December 31, 1998
(NOTE F) - LINE OF CREDIT:
The Fund has a bank line of credit of $15,000,000. Interest is payable at
the Prime Rate. Loans are collateralized by securities owned by the Fund.
At December 31, 1998, the Fund had no outstanding borrowings.
(NOTE G) - OTHER MATTERS:
1. Investments
Unrealized appreciation at December 31, 1998 $26,764,808
Unrealized depreciation at December 31, 1998 (905,401)
Imputed commissions on securities owned (391,000)
-----------
$25,468,407
Year Ended
December 31, 1998
-------------------
Purchases of securities other than short-term investments $82,206,283
Sales of securities other than short-term investments $136,337,355
2. Related Party Transactions
During the year ended December 31, 1998, the Fund sold 331,500 shares of
Milestone Scientific Inc. at a market value of $331,489 to a related
individual. The Fund realized approximately $3 million of capital losses
on the sale.
3. Capital Stock (in shares):
<TABLE>
<CAPTION> Year Ended December 31
----------------------
1998 1997
---- ----
<S> <C> <C>
Shares issued 670,887 426,934
Shares reinvested 1,038,185 516,578
Shares repurchased (1,081,242) (819,382)
----------- ---------
Net increase 627,830 124,130
=========== =========
</TABLE>
<PAGE> 12
REPORT OF INDEPENDENT AUDITORS
Board of Trustees and Shareholders
Gintel Fund
Greenwich, Connecticut
We have audited the statement of net assets of the Gintel Fund as of
December 31, 1998, and the related statement of operations for the year
then ended, statements of changes in net assets for each of the years in
the two-year period then ended, and the condensed financial information for
each of the years in the five-period then ended. These financial
statements and condensed financial information are the responsibility of
the Fund's management. Our responsibility is to express an opinion on
these financial statements and condensed financial information based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
condensed financial information are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, with the
custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial
information enumerated above present fairly, in all material respects, the
financial position of Gintel Fund as of December 31, 1998, the results of
its operations for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended, and the condensed
financial information for each of the years in the five-year period then
ended, in conformity with generally accepted accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
January 22, 1999
<PAGE> 13
GINTEL ASSET MANAGEMENT, INC.
EQUITY STAFF
ROBERT M. GINTEL
Robert Gintel has spent his entire business career in the investment
industry with more than 40 years of experience as a professional investor.
Mr. Gintel is Chairman and Chief Executive Officer of Gintel Asset
Management, Inc. He is also Senior Partner and founder of Gintel & Co.,
a member of the New York Stock Exchange and associate member of the American
Stock Exchange, and Chairman of the Board of Chief Executive Officer of
Gintel Fund. He holds a B.A. degree from Columbia College and an M.B.A.
from the Harvard Business School. Mr. Gintel has served on the Board of
Directors of several New York Stock Exchange listed corporations and is
currently Vice Chairman of the Board of XTRA Corporation. Mr. Gintel has
lectured and written articles on investments and has appeared on Wall
Street Week and other television and radio programs.
CECIL A. GODMAN, III
Mr. Godman joined the Gintel organization in 1985 after spending two
years as a securities analyst with First Tennessee Investment Management,
Inc., a $1.8 billion asset management subsidiary of First Tennessee National
Corporation. He is a General Partner of Gintel & Co. and a director of
Gintel Asset Management, Inc. Mr. Godman received his B.A. in Business
Administration and Economics from Rhodes College in Memphis in 1982.
EDWARD F. CARROLL
Mr. Carroll joined Gintel Asset Management, Inc. in 1983 and is a
General Partner of Gintel & Co. Previously, Mr. Carroll had his own
consulting firm specializing in global energy issues and was on the staff
of the Ford Foundation, where he was directly responsible for all
energy-related investments. Mr. Carroll's 35-year career includes
experience as an analyst with Wall Street firms, Halle & Steiglitz, Henry
Hentz & Company, and E.F. Hutton. He hold a B.G.S. degree from the
University of Connecticut.
R. BAXTER BROWN
Mr. Brown was an original partner of Robert Gintel and co-founding
partner of Gintel & Co. After an absence of seventeen years during which
he was Chief Executive Officer of Baxter Brown & Company and Brown Asset
Management, he rejoined the Gintel Group. Mr. Brown is Senior Vice
President of Gintel Asset Management, Inc. and a General Partner of
Gintel & Co. He began his career in 1956 with the NYSE firm of J.C.
Bradford & Co. and became a general partner of that firm. He holds a
B.A. degree in Economics and Business Administration from Vanderbilt
University.
E. CHARLES JALENAK
Mr. Jalenak joined Gintel Asset Management, Inc. in 1996 as Vice
President after serving as Chief Investment Officer of a family-owned
investment company. He has extensive experience in a wide variety of
investment disciplines, including equities, fixed income, real estate and
venture capital. Previously, Mr. Jalenak worked in the investment banking
departments at Merrill Lynch & Co. (New York) and Morgan Keegan & Co.
(Memphis), focusing on mergers, acquisitions, and debt and equity
financing. Mr. Jalenak received a B.S. degree from Tulane University
and an M.B.A. degree from the Wharton School of the University of
Pennsylvania.
<PAGE> 13
<TABLE>
(CAPTION>
GINTEL FUND TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------------------
<S> <C>
Robert M. Gintel Chairman of the Board of Trustees and Chief Executive Officer
Chairman and Chief Executive Officer, Gintel Asset Management, Inc.;
Senior Partner, Gintel & Co. Limited Partnership
Vice Chairman and Director, XTRA Corporation.
Thomas H. Lenagh Trustee
Financial Consultant; formerly Chairman and Chief Executive Officer of
Greiner Engineering Co.; Director, Adams Express Co., USLife Corp.,
ICN Biomedics, Inc., SCI Systems, Inc., Irvine Sensors Corp., CML Inc.,
Clemente Global, Rexhall Inc.
Francis J. Palamara Trustee
Business Consultant; previously Director and Executive Vice President of
ARA Services, Inc.; formerly Executive Vice President and Chief Operating
Officer of the New York Stock Exchange, Inc.; Director,Glenmede Fund,
XTRA Corporation.
Russel R. Taylor Trustee
Associate Professor of Management and Marketing, Director of H.W. Taylor
Institute of Entrepreneurial Studies, College of New Rochelle;
Founder of Russel Taylor, Inc.
Stephen G. Stavrides Trustee, President and Treasurer
President, Gintel Asset Management, Inc.;
General Partner and Chief Operating Officer, Gintel & Co. Limited Partnership.
Donna K. Grippe Secretary and Assistant Treasurer
INVESTMENT ADVISOR GINTEL GROUP
Gintel Asset Management, Inc. Chase Global Funds Services Company
6 Greenwich Office Park P.O. Box 2798
Greenwich, CT 06831-5197 Boston, MA 02208-2798
203 622-6400 800 344-3092
</TABLE>
