(OUTSIDE FRONT COVER)
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KOBREN INSIGHT FUNDS
ANNUAL REPORT
KOBREN GROWTH FUND
KOBREN MODERATE GROWTH FUND
KOBREN CONSERVATIVE ALLOCATION FUND
DECEMBER 31, 1996
<PAGE>
(INSIDE FRONT COVER)
This report is sent to shareholders of Kobren Insight Funds for their
information. It is not a prospectus, circular or representation intended for use
in the purchase or sale of shares of the funds or of any securities mentioned in
this report.
<PAGE>
Dear Fellow Shareholder:
Let me take this opportunity to welcome each of you as an inaugural shareholder
in the Kobren Insight funds. You know, starting the Kobren Insight funds was a
result of the increasing frustration investors like yourself have experienced in
today's complicated world of mutual funds. When I started on Wall Street twenty
years ago, there were a few hundred funds to choose from. Today there are over
7,500, and the economic environment is also much more complicated.
Kobren Insight funds are designed to make mutual fund investing simple again.
Instead of collecting dozens of mutual funds in your portfolio, your Kobren
Insight fund should streamline your holdings and offer you the active asset
allocation and fund selection necessary to meet your investment objectives. Over
the years I have repeatedly been asked, "How many funds should I own?" I used to
answer that 4 to 7 well diversified choices are probably prudent. With the
launch of the Kobren Insight funds, that number may now be one.
Each of the three Kobren Insight funds employs the same investment discipline
and fund selection process that we have successfully employed for our private
money management clients for many years. As your manager of mutual fund
managers, our mission is to make prudent asset and style allocations, and then
select the best managers within those disciplines. I am pleased by the
confidence you have shown in our organization.
1996 in Perspective
As we develop our investment strategy for 1997, I think it is important to put
1996 in perspective. Everything that could go right for stock prices in 1996
did, beginning with the economy. Economic conditions (from a stock investor's
perspective) were "as good as it gets." We did not slip into recession, nor did
the economy grow so fast as to reduce unemployment materially and raise the
specter of wage inflation. Instead, consumer income and spending levels expanded
at a sustainable pace, while inflation never reared its ugly head. Also helping
stock prices was the record-breaking level of new investments in equity mutual
funds during 1996. Corporate profits were another positive for the equity
markets last year. Finally, stock investors benefited from a status quo
political outcome in the U.S., and no major international conflict occurred to
upset the global markets.
The past two years were among the strongest consecutive years ever for stock
appreciation. But it is important to recognize that it was also one of the
narrowest rallies we have seen in decades. Last year the S&P 500 Index rose
23.0%. But the 50 largest companies gained 30.8%, while the 50 smallest gained
only 1.5%. Thus, in 1996, many funds underperformed the market (S&P 500) as they
focused on less-followed, smaller-cap U.S. and foreign stocks. Few investors
kept up with the S&P 500 Index as virtually every other asset class and area of
the market underperformed this popular benchmark.
During the fourth quarter, stock market volatility increased as investors became
fixated on Federal Reserve Chairman Greenspan's cryptic comments dealing with
the level of "irrational exuberance" in the stock market. In December, the
market hiccuped but bounced back quickly as mutual fund managers used the
opportunity to add to positions in the large-cap growth stocks in their
portfolios. Currently there is a high level of tension in the investment
community as many mutual fund managers are feeling the pressure to remain fully
invested. Emotionally, it is easy to cash in positions that have not kept pace
with the market averages and only buy the top performers. However, chasing price
momentum can be dangerous and is not something that guides our investment
process.
1997 Investment Outlook
Looking forward, we expect modest economic growth with a diminishing inflation
threat which bodes well for the financial markets. However, there is little room
for deviation from this slow growth track and further market gains are highly
dependent on sustaining corporate earnings growth. The risk to this rosy
economic scenario in 1997 is slowing economic growth driven by weak consumer
spending. There is also an outside chance that wage inflation could put modest
pressure on profit margins. During 1997, we expect earnings growth to slow, but
remain solidly above the long term average of 5% growth.
The S&P 500 looks expensive based on many traditional valuation indicators which
include price to earnings, price to book value and dividend yield. But our
studies suggest that valuation is a very poor timing indicator and markets can
remain overvalued for long periods of time. This occurred in the early to
mid-sixties as the economy plodded ahead with very little to no inflationary
threat. While earnings are growing and prospects for continued economic growth
look good, we remain cautiously optimistic for further progress in the equity
market. Therefore, our funds are targeted to be virtually fully invested. At the
same time, we believe that it is prudent to build-in a degree of downside
protection through diversification into sectors of the market that are more
attractively valued such as the small cap value sector and select international
markets.
Fund Strategies As We Enter 1997
One of the nicest features of using mutual funds in a "fund of funds" format is
that the portfolio can efficiently implement an investment strategy regardless
of portfolio size. Therefore, as we entered 1997 in our initial days of
operation, the funds were already positioned in line with our overall market
outlook. As fund assets grow, we will add to our existing positions, all the
while looking for new opportunities and constantly evaluating the viability of
existing fund holdings.
Kobren Growth Fund
Designed for long-term growth of capital, this fund is for investors who are
willing to take a market (S&P 500) risk, have a minimum five year time horizon
and have no need for current income. Based on our sanguine outlook for stocks in
1997, we began the year invested 91% in equity mutual funds with a target of
becoming fully invested early in 1997. Larger-cap stock funds made up nearly 55%
of assets -- evenly divided between growth and value styles. Another 16% was
devoted to the small-cap value sector, including Robertson Stephens Contrarian
Fund. This is a unique fund that owns natural resource stocks and "shorts" the
market via the purchase of S&P 500 puts. The remainder of our small-cap value
allocation is currently invested in Longleaf Partners Small-Cap Fund managed by
Mason Hawkins and Staley Cates. This team has a proven record in discovering
cheap value stocks that offer exciting opportunities.
In addition to our domestic holdings, we have allocated approximately 20% to
diversified international funds. This component is divided almost evenly with
two experienced international fund managers: Richard King (Warburg Pincus
Institutional International Equity Fund) and Mark Yockey (Artisan International
Fund). These fund managers have differing styles, complementing each other very
well. Richard holds a higher position in Japan and the emerging markets while
Mark has been very successful in uncovering values in Europe.
Kobren Moderate Growth Fund
Designed to be somewhat less risky than the Kobren Growth Fund, this fund
entered 1997 with about 11% of its assets in cash and bond funds. As
opportunities arise we will look to prudently pare down this position with
conservative equity or growth and income funds that offer attractive potential
in the advanced stages of a bull market.
Another 45% of assets consisted of funds focusing on larger capitalization
growth and value stocks. One fund to note is the Franklin Mutual Qualified Fund,
managed by Michael Price. Michael has a long track record of finding "cheap"
stocks throughout the world. Averaging over 17% per year over the past three
years is truly commendable given the conservative nature of this growth fund.
Although this fund now requires retail investors to pay a front-end load for
purchases, the Kobren Insight funds have the ability to purchase the fund
load-free.
We have also allocated 9% of assets to a lesser known U.S. small-cap value fund
(Skyline Special Equities Fund) while 20% was devoted to Fidelity Real Estate
Investment Portfolio, a fund specializing in real estate investment trusts.
Finally, 15% went into Tweedy, Browne Global Value Fund, a small-cap, global
value fund.
Kobren Conservative Allocation Fund
Our most conservative fund attempts to maintain only 70% of the volatility
exhibited by the S&P 500 Index. This fund entered 1997 with 10% cash and 15% in
a low duration bond fund. Another 45% of assets was devoted to stock funds,
split between two value funds and a growth and income fund (that invest
primarily in dividend yielding stocks). Another 20% was invested in a real
estate fund, while a modest 10% exposure was established in a small-cap global
value fund.
You may be unfamiliar with our real estate selection, Morgan Stanley
Institutional Real Estate Fund, as it is not available to retail investors.
Managed by the team of Russell Platt and Theodore Bigman, this fund accumulated
an impressive 39.6% gain in 1996. Although we do not expect a repeat of this
performance in 1997, this sector of the market still looks attractive for more
conservative investors.
Once again I thank you for selecting us as your mutual fund manager. We're very
excited about this new venture and trust you are as well. Many investors have
asked us how to track the progress of their funds. We hope to be listed in the
major daily newspapers soon, but for now feel free to call our customer service
staff toll-free at 1-800-4-KOBREN (1-800-456-2736).
Sincerely,
/s/ Eric M. Kobren
Eric M. Kobren
President and Portfolio Manager
February, 1997
<PAGE>
Kobren Insight Funds
Kobren Growth Fund
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares (Note 1)
MUTUAL FUNDS - 90.9%
<S> <C> <C>
Large-Cap Growth - 29.8%
1,066 Fidelity Advisor Growth Opportunities Fund, Class I........................ $ 37,556
1,360 Janus Twenty Fund.......................................................... 37,350
-------------
74,906
Large-Cap Value - 24.8%
1,520 MAS Value Fund............................................................. 24,754
1,164 The Oakmark Fund........................................................... 37,661
-------------
62,415
International - 20.1%
1,914 Artisan International Fund................................................. 25,496
1,528 Warburg Pincus Institutional International Equity Fund..................... 24,979
-------------
50,475
Small-Cap Value - 16.2%
862 Longleaf Partners Small-Cap Fund........................................... 15,386
1,521 Robertson Stephens Contrarian Fund......................................... 25,195
-------------
40,581
TOTAL INVESTMENTS (Cost $227,000*)..................................... 90.9% 228,377
CASH................................................................... 9.1 23,000
OTHER ASSETS AND LIABILITIES (Net)..................................... 0.0 (29)
------ --------------
NET ASSETS............................................................. 100.0% $ 251,348
===== ==========
<FN>
- ------------------
* Aggregate cost for Federal tax purposes.
</FN>
</TABLE>
<PAGE>
Kobren Insight Funds
Kobren Moderate Growth Fund
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares (Note 1)
MUTUAL FUNDS - 99.3%
<S> <C> <C>
Large-Cap Value - 25.4%
751 Babson Value Fund.......................................................... $ 28,350
618 Franklin Mutual Qualified Fund, Class Z.................................... 20,052
-------------
48,402
Real Estate - 20.1%
2,118 Fidelity Real Estate Investment Portfolio.................................. 38,202
-------------
Large-Cap Growth - 19.7%
420 Fidelity Advisor Growth Opportunities Fund, Class I........................ 14,796
1,235 PIMCO Advisors Cadence Capital Appreciation Fund,
Institutional Class...................................................... 22,652
-------------
37,448
International - 14.9%
1,962 Tweedy, Browne Global Value Fund........................................... 28,350
-------------
Bonds - 9.9%
1,807 Vanguard Fixed-Income Intermediate-Term U.S. Treasury Fund................. 18,831
-------------
Small-Cap Value - 9.3%
974 Skyline Special Equities Fund.............................................. 17,679
-------------
TOTAL INVESTMENTS (Cost $188,776*)..................................... 99.3% 188,912
CASH................................................................... 0.7 1,300
OTHER ASSETS AND LIABILITIES (Net)..................................... 0.0 (2)
------ ---------------
NET ASSETS............................................................. 100.0% $ 190,210
===== ==========
<FN>
- ------------------
* Aggregate cost for Federal tax purposes.
</FN>
</TABLE>
<PAGE>
Kobren Insight Funds
Kobren Conservative Allocation Fund
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
Value
Shares (Note 1)
MUTUAL FUNDS - 89.4%
<S> <C> <C>
Large-Cap Value - 34.7%
842 Franklin Mutual Beacon Fund, Class Z....................................... $ 32,785
1,084 T. Rowe Price Equity-Income Fund........................................... 24,422
-------------
57,207
Real Estate - 19.9%
2,279 Morgan Stanley Institutional Real Estate Fund, Class B..................... 32,800
-------------
Bonds - 14.9%
2,448 PIMCO Low Duration Fund.................................................... 24,600
-------------
International - 10.0%
1,135 Tweedy, Browne Global Value Fund........................................... 16,400
-------------
Conservative Growth - 9.9%
702 Scudder Growth and Income Fund............................................. 16,319
-------------
TOTAL INVESTMENTS (Cost $147,600*)..................................... 89.4% 147,326
CASH................................................................... 10.6 17,400
OTHER ASSETS AND LIABILITIES (Net)..................................... 0.0 (1)
------- ----------------
NET ASSETS............................................................. 100.0% $ 164,725
===== ==========
<FN>
- ------------------
* Aggregate cost for Federal tax purposes.
</FN>
</TABLE>
<PAGE>
Kobren Insight Funds
Statements of Assets and Liabilities December 31, 1996
<TABLE>
<CAPTION>
Kobren
Kobren Kobren Conservative
Growth Moderate Allocation
Fund Growth Fund Fund
<S> <C> <C> <C>
ASSETS:
Investments, at value (Note 1)
See accompanying schedules......................................... $ 228,377 $ 188,912 $ 147,326
Cash................................................................... 23,000 1,300 17,400
Deferred offering costs (Note 5)....................................... 23,173 20,398 20,612
Unamortized organization costs (Note 5)................................ 20,816 10,408 10,477
Prepaid expenses....................................................... 2,459 1,230 1,229
Dividends receivable................................................... - -
------------------ ----------------- ------------------
6
Total Assets....................................................... 297,825 222,254 197,044
----------- ------------ -----------
LIABILITIES:
Payable to investment adviser (Note 5)................................. 24,386 20,510 20,754
Organization costs payable (Note 5).................................... 21,000 10,500 10,500
Custodian fees payable (Note 2)........................................ 250 250 250
Accrued expenses and other payables.................................... 841 784 815
--------------- ---------------- ---------------
Total Liabilities.................................................. 46,477 32,044 32,319
------------- -------------- -------------
NET ASSETS............................................................. $ 251,348 $ 190,210 $ 164,725
========== ========== ==========
Investments, at cost................................................... $ 227,000 $ 188,776 $ 147,600
========== ========== ==========
NET ASSETS consist of:
Undistributed net investment income/(accumulated net
investment $ (29) $ 74 $ (1)
loss)..............................................................................
Net unrealized appreciation/(depreciation) of investments.............. 1,377 136 (274)
Par value.............................................................. 25 19 17
Paid-in capital in excess of par value................................. 249,975 189,981 164,983
----------- ----------- -----------
NET ASSETS............................................................. $ 251,348 $ 190,210 $ 164,725
========== ========== ==========
SHARES OUTSTANDING..................................................... 24,557 18,903 16,500
============ ============= ============
Net asset value, offering and redemption price per share............... $ 10.24 $ 10.06 $ 9.98
============ ============= =============
</TABLE>
<PAGE>
Kobren Insight Funds
Statements of Operations
For the Period Ended December 31, 1996*
<TABLE>
<CAPTION>
Kobren
Kobren Kobren Conservative
Growth Moderate Allocation
Fund Growth Fund Fund
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............................................................. $ - $ 82 $ -
Interest............................................................... 1 - -
---------------- -------------- ---------------
Total investment income............................................ 1 82 -
---------------- ------------- ---------------
EXPENSES:
Investment advisory fee (Note 2)....................................... 23 6 1
Administration fee (Note 2)............................................ 3,144 3,144 3,144
Trustees' fees and expenses (Note 2)................................... 3,000 3,000 3,000
Transfer agent fees (Note 2)........................................... 1,402 1,402 1,402
Insurance expense...................................................... 665 333 333
Professional fees...................................................... 533 533 533
Custodian fees (Note 2)................................................ 250 250 250
Amortization of organization costs (Note 5)............................ 184 92 23
Amortization of offering costs (Note 5)................................ 648 284 70
Other.................................................................. 462 405 436
-------------- ------------- ------------
Total expenses......................................................... 10,311 9,449 9,192
Fees waived and/or expenses reimbursed by investment
adviser, administrator and transfer agent (Note 2)................. (10,281) (9,441) (9,191)
------------ ------------ -----------
Net expenses....................................................... 30 8 1
--------------- --------------- --------------
NET INVESTMENT INCOME/(LOSS)........................................... (29) 74 (1)
--------------- -------------- --------------
NET UNREALIZED APPRECIATION/(DEPRECIATION)
OF INVESTMENTS (Notes 1 and 3) .................................... 1,377 136 (274)
------------- ------------ ------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.......................................... $ 1,348 $ 210 $ (275)
<FN>
============ =========== ===========
- ---------------
* Kobren Growth Fund, Kobren Moderate Growth Fund and Kobren Conservative Allocation Fund commenced
operations on
December 16, 1996, December 24, 1996 and December 30, 1996, respectively.
</FN>
</TABLE>
<PAGE>
Kobren Insight Funds
Statements of Changes in Net Assets
Period Ended December 31, 1996*
<TABLE>
<CAPTION>
Kobren
Kobren Kobren Conservative
Growth Moderate Allocation
Fund Growth Fund Fund
<S> <C> <C> <C>
Net investment income/(loss)........................................... $ (29) $ 74 $ (1)
Net unrealized appreciation/(depreciation) of
investments during the period...................................... 1,377 136 (274)
------------- -------------- --------------
Net increase/(decrease) in net assets resulting from operations........ 1,348 210 (275)
Net increase in net assets from fund share transactions (Note 4)....... 200,000 165,000 140,000
----------- ---------- -----------
Net increase in net assets............................................. 201,348 165,210 139,725
NET ASSETS:
Beginning of period (original capital November 6, 1996)................ 50,000 25,000 25,000
------------ ------------ ------------
End of period.......................................................... $ 251,348 $ 190,210 $ 164,725
========== ========== ==========
Undistributed net investment income/(accumulated net
investment loss)................................................... $ (29) $ 74 $ (1)
============== =============== ================
<FN>
- ---------------
* Kobren Growth Fund, Kobren Moderate Growth Fund and Kobren Conservative Allocation Fund commenced
operations on
December 16, 1996, December 24, 1996 and December 30, 1996, respectively.
</FN>
</TABLE>
<PAGE>
Kobren Insight Funds
Kobren Growth Fund
Financial Highlights
For a fund share outstanding throughout the period.
<TABLE>
<CAPTION>
Period
Ended
12/31/96(a)
<S> <C>
Net asset value - beginning of period.................................. $ 10.00
--------
Net investment loss.................................................... (0.00) (d)
Net unrealized appreciation of investments............................. 0.24
----------
Net increase in net assets resulting from investment operations........ 0.24
----------
Net asset value - end of period........................................ $ 10.24
========
Total return (b)....................................................... 2.40%
==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's)................................... $251
Ratio of net investment loss to average net assets..................... (0.97) %(c)(e)
Ratio of operating expenses to average net assets...................... 1.00 %(c)
Ratio of operating expenses to average net assets before fees waived and/or
expenses reimbursed by investment adviser,
administrator and transfer N/A (e)
agent......................................................
Net investment loss per share before fees waived and/or expenses reimbursed by
investment adviser, administrator and
transfer agent................................................... $(0.42)
<FN>
- -----------------------------
(a) Kobren Growth Fund commenced operations on December 16, 1996.
(b) Total return represents aggregate total return for the period indicated.
(c) Annualized.
(d) Amount represents less than $0.01 per share.
(e) Since the Kobren Growth Fund was in operation for a short period of time,
these ratios are not meaningful.
</FN>
</TABLE>
<PAGE>
Kobren Insight Funds
Kobren Moderate Growth Fund
Financial Highlights
For a fund share outstanding throughout the period.
<TABLE>
<CAPTION>
Period
Ended
12/31/96(a)
<S> <C>
Net asset value - beginning of period.................................. $ 10.00
--------
Net investment income.................................................. 0.00 (d)
Net unrealized appreciation of investments............................. 0.06
----------
Net increase in net assets resulting from investment operations........ 0.06
----------
Net asset value - end of period........................................ $ 10.06
========
Total return (b)....................................................... 0.60%
==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)................................... $190
Ratio of net investment income to average net assets................... 8.95 %(c)(e)
Ratio of operating expenses to average net assets...................... 1.00 %(c)
Ratio of operating expenses to average net assets before fees waived and/or
expenses reimbursed by investment adviser,
administrator and transfer N/A (e)
agent......................................................
Net investment loss per share before fees waived and/or expenses reimbursed by
investment adviser, administrator and
transfer agent................................................... $(0.50)
<FN>
- --------------
(a) Kobren Moderate Growth Fund commenced operations on December 24, 1996.
(b) Total return represents aggregate total return for the period indicated.
(c) Annualized.
(d) Amount represents less than $0.01 per share.
(e) Since the Kobren Moderate Growth Fund was in operation for a short period
of time, these ratios are not meaningful.
</FN>
</TABLE>
<PAGE>
Kobren Insight Funds
Kobren Conservative Allocation Fund
Financial Highlights
For a fund share outstanding throughout the period.
<TABLE>
<CAPTION>
Period
Ended
12/31/96(a
<S> <C>
Net asset value - beginning of period.................................. $ 10.00
--------
Net investment loss.................................................... (0.00) (d)
Net unrealized depreciation of investments............................. (0.02)
----------
Net decrease in net assets resulting from investment operations........ (0.02)
----------
Net asset value - end of period........................................ $ 9.98
=========
Total return (b)....................................................... (0.20)%
==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)................................... $165
Ratio of net investment loss to average net assets..................... (1.00) %(c)(e)
Ratio of operating expenses to average net assets...................... 1.00 %(c)
Ratio of operating expenses to average net assets before fees waived and/or
expenses reimbursed by investment adviser,
administrator and transfer N/A (e)
agent......................................................
Net investment loss per share before fees waived and/or expenses
reimbursed by investment adviser, administrator and $(0.56)
transfer agent...................................................
<FN>
- ----------------------
(a) Kobren Conservative Allocation Fund commenced operations on December 30, 1996.
(b) Total return represents aggregate total return for the period indicated.
(c) Annualized.
(d) Amount represents less than $0.01 per share.
(e) Since the Kobren Conservative Allocation Fund was in operation for a short
period of time, these ratios are not meaningful.
</FN>
</TABLE>
<PAGE>
Kobren Insight Funds
Notes to Financial Statements
December 31, 1996
1. Significant Accounting Policies.
Kobren Insight Funds (the "Trust") was organized on September 13, 1996 as
a Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a no-load, open-end
diversified management investment company. As of December 31, 1996, the Trust
offers shares of three funds, Kobren Growth Fund, Kobren Moderate Growth Fund
and Kobren Conservative Allocation Fund (individually, a "fund" and
collectively, the "funds"). Each fund seeks to achieve its investment objectives
by investing primarily in shares of other investment companies ("underlying
funds") but may also invest directly in securities that are suitable investments
for that fund.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the funds in the
preparation of their financial statements.
Portfolio Valuation - The underlying funds are valued according to their
stated net asset value. Each fund's investment 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. Bid price is
used when no asked price is available. Short-term investments are valued at
amortized cost, which approximates market value. 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.
Dividends and Distributions - It is the policy of Kobren Growth Fund and
Kobren Moderate Growth Fund to declare and pay dividends from net investment
income annually. Kobren Conservative Allocation Fund has a policy of paying such
dividends quarterly. Each fund will distribute net realized capital gains
(including net short-term capital gains), unless offset by any available capital
loss carryforward, annually. Additional distributions of net investment income
and capital gains for each fund may be made in order to avoid the application of
a 4% non-deductible excise tax on certain undistributed amounts of ordinary
income and capital gain. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments of income and gain on various investment securities held by
a fund, timing differences and differing characterizations of distributions made
by a fund.
Securities Transactions and Investment Income - Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the specific identified cost basis. Dividend income
is recognized on the ex-dividend date. Dividend income on foreign securities is
recognized as soon as a fund is informed of the ex-dividend date. Interest
income is recognized on the accrual basis.
<PAGE>
Kobren Insight Funds
Notes to Financial Statements - (Continued)
December 31, 1996
Federal Income Tax - Each fund intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Code, and to make
distributions of taxable income to shareholders sufficient to relieve each fund
from all or substantially all federal income taxes.
Expenses - General expenses of the Trust are allocated among the funds
based upon relative net assets of each fund. Operating expenses directly
attributable to a fund are charged to that fund's operations.
2. Investment Advisory Fee, Administration Fee and Other Transactions.
The Trust has entered into an investment advisory agreement (the "Advisory
Agreement") with Insight Management, Inc. ("Insight Management"). The Advisory
Agreement provides that each fund will pay Insight Management a fee, computed
daily and paid monthly, at the annual rate of 0.75% of each fund's average daily
net assets. This fee will be offset by any 12b-1 fee and advisory fee revenue
payable under agreements between Insight Brokerage Services, Inc. (the Trust's
distributor) and underlying funds. Insight Management has voluntarily agreed to
limit each fund's other operating expenses to 0.25% of each fund's average daily
net assets until December 31, 1997.
For the period ended December 31, 1996, the investment adviser,
administrator and transfer agent waived fees and/or reimbursed expenses as
follows:
<TABLE>
<CAPTION>
Fees waived Fees waived Expenses reimbursed
by Administrator by Transfer Agent by Investment Adviser
<S> <C> <C> <C>
Kobren Growth Fund............................... $3,144 $1,402 $5,735
Kobren Moderate Growth Fund...................... 3,144 1,402 4,895
Kobren Conservative Allocation Fund.............. 3,144 1,402 4,645
</TABLE>
No officer, director or employee of Insight Management, Insight Brokerage
Services, Inc., FDISG, or any affiliate thereof, receives any compensation from
the Trust for serving as a trustee or officer of the Trust. Each Trustee who is
not an "affiliated person" receives an annual fee of $5,000 plus $1,000 for each
board meeting attended and $500 for each committee meeting attended. The Trust
also reimburses out-of-pocket expenses incurred by each Trustee in attending
such meetings.
The Trust has also entered into an administration agreement (the
"Administration Agreement") with First Data Investor Services Group, Inc.
("FDISG"), a wholly-owned subsidiary of First Data Corporation. FDISG also
serves as the Trust's transfer agent and dividend paying agent. Boston Safe
Deposit and Trust Company, an indirect wholly-owned subsidiary of Mellon Bank
Corporation, serves as the Trust's custodian. Insight Brokerage Services, Inc.,
an affiliate of Insight Management, serves as distributor of the funds' shares
and pays all distribution costs. No distribution fees are paid by the funds.
<PAGE>
Kobren Insight Funds
Notes to Financial Statements - (Continued)
December 31, 1996
3. Purchases and Sales.
The aggregate amount of purchases and sales of underlying funds and
investment securities, other than U.S. government and short-term securities, for
the period ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Kobren Growth Fund............................... $227,000 -
Kobren Moderate Growth Fund...................... 188,776 -
Kobren Conservative Allocation Fund.............. 147,600 -
</TABLE>
At December 31, 1996, aggregate gross unrealized appreciation for all
underlying funds and securities in which there was an excess of value over tax
cost and aggregate gross unrealized depreciation for all underlying funds and
securities in which there was an excess of tax cost over value for Federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Tax Basis Tax Basis
Unrealized Unrealized
Appreciation Depreciation
<S> <C> <C>
Kobren Growth Fund............................... $ 1,523 $ 146
Kobren Moderate Growth Fund...................... 622 486
Kobren Conservative Allocation Fund.............. - 274
</TABLE>
4. Shares of Beneficial Interest.
As of December 31, 1996, an unlimited number of shares of beneficial
interest, having a par value of $0.001, were authorized for the Trust. Changes
in shares of beneficial interest were as follows:
Kobren Insight Funds
Notes to Financial Statements - (Continued)
December 31, 1996
Period Ended
December 31, 1996*
Shares Amount
Kobren Growth Fund:
Shares Sold.......................... 19,557 $200,000
-------- --------
Net Increase......................... 19,557 $200,000
======== ========
Period Ended
December 31, 1996*
Shares Amount
Kobren Moderate Growth Fund:
Shares Sold.......................... 16,403 $165,000
-------- --------
Net Increase......................... 16,403 $165,000
======== ========
<PAGE>
Period Ended
December 31, 1996*
Shares Amount
Kobren Conservative
Allocation Fund:
Shares Sold.......................... 14,000 $140,000
-------- --------
Net Increase......................... 14,000 $140,000
======== ========
- ---------------
* Kobren Growth Fund, Kobren Moderate Growth Fund and Kobren Conservative
Allocation Fund commenced operations on December 16, 1996, December 24, 1996,
and December 30, 1996, respectively.
At December 31, 1996, Insight Management owned 5,000, 2,500 and 2,500
shares of Kobren Growth Fund, Kobren Moderate Growth Fund and Kobren
Conservative Allocation Fund, respectively.
5. Organization Costs.
Offering costs, including the fees and expenses of registering and
qualifying its shares for distribution under Federal and state securities
regulations, have been advanced by Insight Management, and are being amortized
over the one-year period from the date upon which each fund commenced its
operations. Expenses incurred in connection with the organization of each fund
are being amortized on a straight-line basis over a period not to exceed sixty
months from the date upon which each fund commenced its operations.
6. Risk Factors of the Funds.
Investing in underlying funds through a fund involves additional and
duplicative expenses and certain tax results that would not be present if an
investor were to make a direct investment in the underlying funds. A fund,
together with the other funds and any "affiliated persons" (as such term is
defined in the 1940 Act) may purchase only up to 3% of the total outstanding
securities of an underlying fund. Accordingly, when the Trust, Insight
Management or their affiliates hold shares of any of the underlying funds, each
fund's ability to invest fully in shares of such underlying funds may be
restricted, and Insight Management must then, in some instances, select
alternative investments for the fund that would not have been its first choice.
<PAGE>
(INSIDE BACK COVER)
Report of Independent Accountants
To the Shareholders and Board of Trustees
of Kobren Insight Funds:
We have audited the accompanying statements of assets and liabilities of each of
the series of Kobren Insight Funds (comprised of Kobren Growth Fund, Kobren
Moderate Growth Fund and Kobren Conservative Allocation Fund (the "funds"),
including the portfolio of investments, as of December 31, 1996, and the related
statements of operation and statements of changes in net assets for the period
then ended, and the financial highlights for the period then ended. These
financial statements and financial highlights are the responsibility of the
funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
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 financial
highlights 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, 1996 by correspondence 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 financial highlights referred to
above present fairly, in all material respects, the financial position of the
funds enumerated above as of December 31, 1996, the results of its operations,
the changes in its net assets, and the financial highlights for the period then
ended, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 14, 1997
<PAGE>
(OUTSIDE BACK COVER)
INSIGHT BROKERAGE SERVICES, INC., DISTRIBUTOR
20 WILLIAM STREET, P.O. 9150
WELLESLEY, HILLS, MA 02181
<PAGE>
