Kobren Delphi Value Fund
Semi-Annual Report
June 30, 1999
Dear Shareholder,
The first half of 1999 can be characterized by continued speculation in
high multiple, large capitalization growth stocks and irrational gambling fever
in internet equities. Nonetheless, we are pleased to report that both classes of
the Kobren Delphi Value Fund (retail +13.1% and institutional +13.2%) handily
outpaced the S&P 500 (+12.4%), the Russell 2500 Value (+6.7%) and the Russell
2000 Value (+5.3%) indices.
We attribute our initial success to a commitment to purchasing good
businesses at attractively low valuations. Contrary to contemporary wisdom, we
believe that earnings per share, free cash flow, and balance sheet strength
still matter.
Since the Kobren Delphi Value Fund is relatively new, it is worth
reiterating that we perform no market timing. While forecasting the direction of
the market makes great entertainment for financial news programs, it is a
fruitless exercise. Responding to every piece of economic data (e.g., Consumer
Price Index, Jobless Claims, Retail Sales) would cause excessive portfolio
turnover. Rather we construct a portfolio on a "bottom-up" basis through
individual stock selection, diversify with more than sixty-five holdings, and
attempt to remain "fully invested" at all times.
At June 30th, the fund reached $45.3 million in assets with 94.4%
equity exposure. The heaviest portfolio weightings can be found in the media and
technology sectors. Well managed television, cable, and newspaper properties
have a license to "print money" and the ability to raise prices in a low
inflationary environment. Obviously, technology has fueled the recent US
economic boom. Since we cannot own highfliers like Cisco or EMC, the fund has
concentrated on low price/book value companies like Arrow Electronics and Avnet,
low multiple firms such as Hubbell and Thomas & Betts, and turnaround situations
like LSI Logic and LTX Corp.
A review of the individual positions indicates that the best performers
emanated from the publishing & broadcasting, retailing, energy, technology,
conglomerate, and manufacturing sectors. For the record, seventeen stocks
appreciated more than 25% in the first half. LTX, a small semiconductor
equipment manufacturer of electronic testers, ranked first with a 143% gain.
Cross Timbers Oil based in Ft. Worth, Texas benefited from rising oil prices
with 99% appreciation. Conversely, our bank and insurance holdings proved to be
laggards. Ironically, many of our financial service holdings sell at single
digit multiples of forecast earnings or absolutely low price/book valuations.
While the US equity markets appear expensive at 28x 1999's estimated
earnings, the US economy is still healthy. We strongly disagree with Chairman
Greenspan's pessimism concerning the outlook for inflation. In researching
literally hundreds of companies, we find scant evidence of pricing power except
in cement, gypsum drywall, and media. Candidly, most wage increases are being
absorbed by productivity increases. The Federal Reserve Board's preemptive
strike may be more closely aligned with curbing speculation in the stock market
than with dampening inflation.
I thank you for your support.
Very truly yours,
/s/ SCOTT M. BLACK
Scott M. Black
<PAGE>
Portfolio of Investments
June 30, 1999
(Unaudited)
Shares Value (Note 1)
COMMON STOCKS - 93.87%
ADVERTISING - 0.84%
1,150 Grey Advertising, Inc. $ 382,950
AEROSPACE/TECHNOLOGY - 13.61%
33,200 Arrow Electronics, Inc. (1) 630,800
12,500 Avnet, Inc. 581,250
21,500 AVX Corp. 524,062
12,600 Cohu, Inc. 445,725
13,000 Hubbell, Inc.(Class B) 589,875
8,000 Litton Industries, Inc. (1) 574,000
15,500 LSI Logic (1) 714,938
59,000 LTX Corp. (1) 785,437
25,500 SpeedFam-IPEC, Inc. (1) 409,594
14,500 Tech-Sym Corp. (1) 344,375
12,000 Thomas & Betts Corp. 567,000
6,167,056
BANKING - 9.85%
8,000 BankAmerica Corp. 586,500
54,800 BankAtlantic Bancorp. 397,300
32,150 Colonial BancGroup, Inc. 448,091
15,000 Community Bank System 380,625
28,000 First Essex Bancorp, Inc. 455,000
9,500 First Union Corp. 446,500
25,000 Peoples Heritage Financial Group 470,312
32,800 Sovereign Bancorp, Inc. 397,700
10,000 Union Planters Corp. 446,875
16,000 Webster Financial Corp. 434,000
4,462,903
CONGLOMERATES - 8.91%
9,500 AlliedSignal, Inc. 598,500
330 Berkshire Hathaway, Inc., Class B (1) 739,200
54,500 Griffon Corp. (1) 425,781
15,000 National Service Industries, Inc. 540,000
12,700 Norsk Hydro ASA, ADR 485,775
20,700 Pittway Corp., Class A 707,681
20,000 St. Joe Co. 540,000
4,036,937
CONSTRUCTION & REAL ESTATE - 5.25%
28,600 Horton (D.R.), Inc. 475,475
18,500 Lennar Corp. 444,000
14,500 Smith (Charles E.) Residential Realty, Inc. 492,094
7,000 Southdown, Inc. 449,750
19,300 Sovran Self Storage, Inc. 519,894
2,381,213
CONSUMER RELATED - 3.49%
20,000 Disney (Walt) Co. 616,250
7,500 Hilfiger (Tommy) Corp. (1) 551,250
21,950 Polo Ralph Lauren Corp. (1) 417,050
1,584,550
ENERGY - 5.87%
28,900 Cabot Oil & Gas Corp. 538,263
46,500 Cross Timbers Oil Co. 691,687
12,500 Devon Energy Corp. 446,875
29,000 Global Marine, Inc. (1) 447,688
13,500 Unocal Corp. 534,937
2,659,450
FINANCIAL SERVICES - 3.04%
10,385 Bear Stearns Cos., Inc. 485,499
6,400 Donaldson Lufkin & Jenrette, Inc. 385,600
7,000 Goldman Sachs Group, Inc. (1) 505,750
1,376,849
FOOD & BEVERAGE - 4.82%
9,500 Coca-Cola Bottling Co. 532,000
22,100 Cracker Barrel Group, Inc. 382,606
18,000 Pepsi Bottling Group, Inc. 415,125
39,000 Ryan Family Steak Houses, Inc. (1) 453,375
25,000 Schultz Sav-O Stores, Inc. 400,000
2,183,106
INSURANCE - 6.73%
33,500 Centris Group, Inc. $ 339,188
8,000 Chubb Corp. 556,000
22,000 Fremont General Corp. 415,250
25,600 IPC Holdings, Ltd. 512,000
13,100 Renaissance Re Holdings, Ltd. 484,700
11,200 United Fire & Casualty Co. 291,200
8,000 XL Capital, Ltd., Class A 452,000
3,050,338
MANUFACTURING - 7.57%
41,350 Agrium, Inc. 364,397
13,500 Arvin Industries, Inc. 511,312
17,500 Banta Corp. 367,500
16,500 Big Flower Press Holdings, Inc. (1) 525,938
11,000 Dana Corp. 506,687
11,500 Lear Corp. (1) 572,125
23,500 SIFCO Industries, Inc. 193,875
11,600 Trinity Industries, Inc. 388,600
3,430,434
PUBLISHING & BROADCASTING - 17.70%
15,900 Central Newspapers, Inc., Class A 598,237
15,400 Comcast Corp., Class A 591,938
8,200 Gannett, Inc. 585,275
20,300 Hearst-Argyle Television, Inc. (1) 487,200
10,500 Knight Ridder, Inc. 576,844
18,100 Lee Enterprises, Inc. 552,050
15,000 McClatchy Co., Class A 496,875
15,600 News Corp., Ltd, ADR 550,875
21,400 Penton Media, Inc. 518,950
11,700 Scripps (E.W.) Co., Class A 556,481
8,500 Time Warner, Inc. 624,750
9,900 United States Cellular Corp. (1) 529,650
14,100 Viacom, Inc., Class B (1) 620,400
1,363 Washington Post, Class B 732,953
8,022,478
RETAIL - 5.68%
18,700 Claire's Stores, Inc. 479,188
10,700 Federated Department Stores, Inc. (1) 566,431
13,500 May Department Stores Co. 551,812
8,500 Ross Stores, Inc. 428,188
19,000 Saks, Inc. (1) 548,625
2,574,244
TEXTILES & APPAREL - 0.51%
25,500 Maxwell Shoe Co. (1) 231,094
TOTAL COMMON STOCKS 42,543,602
(Cost $38,612,393)
INVESTMENT COMPANY - 5.60%
2,535,721 Dreyfus Cash Management Plus Fund 2,535,721
TOTAL INVESTMENT COMPANY 2,535,721
(Cost $2,535,721)
TOTAL INVESTMENTS - 99.47% 45,079,323
(Cost $41,148,114*)
NET OTHER ASSETS
AND LIABILITIES - 0.53% 241,566
Total Net Assets - 100.00% $ 45,320,889
(1) Non-income producing.
ADR American Depositary Receipt.
* For Federal income tax purposes, cost is $41,148,114 and appreciation
/(depreciation) is as follows:
Unrealized appreciation: $ 5,128,943
Unrealized depreciation: (1,197,734)
Net unrealized appreciation: $ 3,931,209
See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
June 30, 1999
(Unaudited)
ASSETS:
Investments, at value
See accompanying schedules $ 45,079,323
Dividends receivable 34,405
Interest receivable 9,644
Receivable for fund shares sold 407,194
Prepaid expenses 15,817
Total assets 45,546,383
LIABILITIES:
Payable for investment securities purchased 127,053
Payable for fund shares redeemed 28,119
Investment advisory fee payable 34,068
Distribution fee payable 8,555
Accrued trustees' fees and expenses 2,779
Accrued expenses and other payables 24,920
Total liabilities 225,494
NET ASSETS $ 45,320,889
Investments, at cost $ 41,148,114
NET ASSETS consist of:
Undistributed net investment income $ 82,452
Accumulated net realized gain
on investments sold 355,133
Net unrealized appreciation of investments 3,931,209
Par value (Shares of beneficial interest,
$0.001 per share) 3,956
Paid-in capital in excess of par value 40,948,139
NET ASSETS $ 45,320,889
Computation of net asset value
Retail Class Shares:
Net asset value, offering and redemption price
per share ($26,929,105 / 2,351,260 shares) $ 11.45
Institutional Class Shares:
Net asset value, offering and redemption price
per share ($18,391,784 / 1,604,587 shares) $ 11.46
See Notes to Financial Statements
Statement of Operations
June 30, 1999
(Unaudited)
INVESTMENT INCOME:
Dividends $ 325,662
Interest 8,752
Total investment income 334,414
EXPENSES:
Investment advisory fee 158,177
Administration fee 36,250
Transfer agent fees 29,099
Sub-transfer agent fee (Retail Class) 1,677
Custodian fees 13,129
Professional fees 11,503
Trustees' fees and expenses 5,264
Registration and filing fees 17,387
Distribution fees (Retail Class) 21,034
Other 3,015
Total expenses 296,535
Fees waived and/or expenses reimbursed
by investment advisor and administrator (38,895)
Net expenses 257,640
NET INVESTMENT INCOME 76,774
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from security transactions 355,133
Change in unrealized appreciation of securities 3,872,649
Net realized and unrealized gain on investments 4,227,782
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 4,304,556
Statement of Changes in Net Assets
For the Six Months For the Period
Ended June 30, 1999 December 23, 1998
(UNAUDITED) (commencement of
operations) to
December 31, 1998
Net investment income $ 76,774 $ 803
Net realized gain from security
transactions 355,133 --
Change in unrealized appreciation
of investments 3,872,649 58,560
Net increase in net assets resulting
from operations 4,304,556 59,363
Net increase in net assets from
fund share transactions 35,688,734 5,268,236
Net increase in net assets 39,993,290 5,327,599
Net Assets:
Beginning of period 5,327,599 --
End of period $ 45,320,889 $ 5,327,599
Undistributed net investment income
at end of period $ 82,452 $ 5,678
See Notes to Financial Statements
<PAGE>
Financial Highlights
For a Fund Share Outstanding Throughout the Period
Retail Class Shares
For the Six Months For the Period
Ended June 30, 1999 December 23, 1998
(UNAUDITED) (commencement of
operations) to
December 31, 1998
Net asset value - beginning
of period $ 10.12 $ 10.00
Net investment income 0.02 (c) 0.01
Net realized and unrealized
gain on investments 1.31 0.11
Net increase in net assets
resulting from investment
operations 1.33 0.12
Net asset value - end of period $ 11.45 $ 10.12
Total return (a) 13.14% 1.20%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) $ 26,929 $ 5,056
Ratio of net investment income/(loss)
to average net assets 0.37%(b) 0.82%(b)
Ratio of operating expenses to average net assets
after waivers and/or expense
reimbursements 1.75%(b) 1.75%(b)
Portfolio turnover rate 7% 0%
Ratio of operating expenses to average net assets before fees waived and/or
expenses reimbursed by investment advisor
and administrator. 2.00%(b) 10.91%(b)
(a) Total return represents aggregate total return for the period indicated.
(b) Annualized.
(c) The selected per share data was calculated using the weighted average share
method for the period.
See Notes to Financial Statements
<PAGE>
Financial Highlights
For a Fund Share Outstanding Throughout the Period
Institutional Class Shares
For the Six Months For the Period
Ended June 30, 1999 December 23, 1998
(UNAUDITED) (commencement of
operations) to
December 31, 1998
Net asset value - beginning
of period $ 10.12 $ 10.00
Net investment income 0.03(c) 0.01
Net realized and unrealized gain on
investments 1.31 0.11
Net increase in net assets resulting
from investment operations 1.34 0.12
Net asset value - end of period $ 11.46 $ 10.12
Total return (a) 13.24% 1.20%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) $ 18,392 $ 272
Ratio of net investment income/(loss)
to average net assets 0.62%(b) 1.07%(b)
Ratio of operating expenses to average net assets
after waivers and/or expense
reimbursements 1.50%(b) 1.50%(b)
Portfolio turnover rate 7% 0%
Ratio of operating expenses to average net assets before fees waived and/or
expenses reimbursed by investment advisor
and administrator. 1.73%(b) 10.66%(b)
(a) Total return represents aggregate total return for the period indicated.
(b) Annualized.
(c) The selected per share data was calculated using the weighted average share
method for the period.
See Notes to Financial Statements
<PAGE>
Notes to Financial Statements (Unaudited)
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 June 30, 1999 the Trust offered
shares of three funds, Kobren Growth Fund, Kobren Moderate Growth Fund and
Kobren Delphi Value Fund. Information presented in these financial statements
pertains only to the Kobren Delphi Value Fund (the "fund"). The fund is
authorized to issue two classes of shares - the Retail Class and the
Institutional Class. Each class of shares outstanding bears the same voting,
dividend, liquidation and other rights and conditions, except that the expenses
incurred in the distribution and marketing of such shares are different for each
class. Additionally, the Retail Class is subject to 12b-1 fees and sub-transfer
agent fees. The fund seeks to achieve its investment objective by investing
primarily in equity securities of U.S.
companies.
Use of Estimates -- 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 -- Investment securities are valued at the last sale price
on the securities exchange or national securities market on which such
securities are primarily 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 securities 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 or under the direction of the Board of
Trustees.
Dividends and Distributions -- It is the policy of the fund to declare and pay
dividends from net investment income annually.The 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 the 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 due primarily to differing treatments of income and prepaid
expenses.
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.
Federal Income Tax -- The fund has qualified and intends to continue to qualify
as a regulated investment company under Subchapter M of the Internal Revenue
Code, applicable to regulated investment companies and to distribute
substantially all of its earnings to its shareholders. Therefore, no federal
income or excise tax provision is applicable.
Expenses -- Certain of the Trust's other expenses are allocated equally to those
funds which make up the Trust. Other expenses of the Trust are allocated among
the funds based upon relative net assets of each fund.
2. Investment Advisory Fee, Administration Fee and Other Transactions
The Trust has entered into an investment advisory agreement (the
"Advisory Agreement") with Kobren Insight Management, Inc. ("KIM" or the
"Advisor") who has subsequently engaged Delphi Management, Inc. ("Delphi") as
the fund's subadvisor. The Advisory Agreement provides that the fund pays KIM a
fee, computed daily and paid monthly, at the annual rate of 1.00% of the fund's
average daily net assets. KIM is solely responsible for the payment of the
subadvisor fee to Delphi. KIM has voluntarily agreed to limit the fund's total
annual operating expenses of the Retail Class and Institutional Class to no more
than 1.75% and 1.50%, respectively, of the fund's average daily net assets until
January 1, 2000.
For the period ended June 30, 1999, the Advisor reimbursed fees
amounting to $22,254.
The Trust has also entered into an administration agreement (the
"Administration Agreement") with First Data Investor Services Group, Inc. (the
"Administrator"), a wholly-owned subsidiary of First Data Corporation. The
Administrator also serves as the Trust's transfer agent and dividend paying
agent. Kobren Insight Brokerage, Inc. ("KIB"), an affiliate of KIM, serves as
distributor of the fund.
For the period ended June 30, 1999, the Administrator and transfer
agent waived fees amounting to $14,964.
No officer, director or employee of KIM, KIB, the Administrator, 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.
3. Distribution and Shareholder Servicing Fees
The Retail Class of the fund has adopted a Shareholder Servicing and
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940. The fund pays KIB, distributor of the fund and affiliate of
KIM, a monthly fee ("12b-1 Fee") for distribution and/or shareholder services
provided, at an annual rate of 0.25% of the average daily net assets
attributable to the Retail Class of shares.
4. Sub-Transfer Agent Fees
The Retail Class of the fund is subject to sub-transfer agent fees
consisting of broker-dealer and fund network fees. The fund pays participating
networks a monthly fee for completing shareholder orders and other shareholder
servicing functions, at an annual rate of 0.10% of the average daily balance of
those networks. Currently, all sub-transfer fees have been reimbursed by the
Advisor to maintain the expense limitation of 1.75% that has been set on the
Retail Class of the Fund. As of June 30, 1999, the sub-transfer agent fees that
were reimbursed by the Advisor amounted to $1,677.
5. Purchases and Sales
The aggregate amounts of purchases and sales of the fund's investment
securities, other than short-term securities, for the six months ended June 30,
1999, were $37,872,012 and $1,793,920 of non-governmental issues, respectively.
6. Shares of Beneficial Interest
As of June 30, 1999, an unlimited number of shares of beneficial
interest, par value $0.001, was authorized for the Trust. Changes in shares of
beneficial interest for the fund were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Six Month Ended
June 30, 1999 Period Ended
(UAUDITED) December 31, 1998
Shares Amount Shares Amount
Retail Class:
Shares Sold 1,998,210 $21,070,802 499,444 $4,999,226
Shares Issued as Reinvestment
of Dividends -- -- -- --
Shares Redeemed (146,394) (1,551,337) -- --
Net Increase 1,851,816 $19,519,465 499,444 $4,999,226
Institutional Class:
Shares Sold 1,836,729 $18,856,439 26,849 $269,010
Shares Issued as Reinvestment
of Dividends -- -- -- --
Shares Redeemed (258,991) (2,687,170) -- --
Net Increase 1,577,738 $16,169,269 26,849 $269,010
</TABLE>
At June 30, 1999, KIM, Delphi and its affiliates owned 705,367 Retail
Class shares of the fund.
