Kobren Insight Management, Inc.
Kobren Insight Funds
Kobren Growth, Kobren Moderate Growth, Kobren Conservative Allocation
Annual Report
December 31, 1998
Message To Shareholders
Volatile Year Ends On A Good Note
Like the weather in New England, if you didn't like what was happening in
the stock market over the past year, all you had to do was wait. A very volatile
1998 closed with some positive news as the market and our funds recovered during
the fourth quarter, recouping all of the losses they suffered during the late
summer and early fall ... and then some.
[Picture of Eric M. Kobren]
In our third quarter report we wrote about the quick turn in investor
sentiment. As the market declined during the summer, many investors went from a
feeling of tremendous greed to outright fear. Then, in early October, the market
responded to another interest-rate cut and retraced its earlier losses. Once
again, it appears that investors are in the greed mode. We're not saying the
market is going to drop tomorrow, but it is a little disconcerting that a few
"hot stocks" have once again become the top subject of conversation.
It is important to understand that much of the market's gain last year
was the result of just a handful of high-growth technology companies. Fully 25%
of the market's gain, as measured by the S&P 500, came from just five stocks:
Intel, Cisco, Microsoft, Lucent and Dell. And even though small-cap stocks did
experience a surge last quarter, one-third of the small-cap stocks tracked by
Morningstar still declined 30% or more during 1998.
Managing Risk Through Asset Allocation
As large-cap stocks outperformed small caps, the disparity in
valuations have become even more pronounced. Indeed, the large-cap
stock-oriented S&P 500 ended the year with a price-earnings multiple of about 30
versus an historic average of 14. This is all the more remarkable given that
economic growth is slowing to a crawl and corporate earnings in 1999 are
expected to grow less than 5%.
For these reasons, we enter 1999 even more committed to managing risk
by diversifying each fund by asset class and investment style. Rather than
jumping on the bandwagon of high-growth technology-oriented funds, we've
maintained a healthy dose of stock exposure in areas that have (in our opinion)
less downside risk. This includes investing in value-oriented large- and
small-cap funds. Small caps, for example, are selling at only 20 times earnings
on average, despite having higher expected growth rates than their large-cap
cousins. And all funds include at least some exposure to the international
markets.
A Frustrating Year for Managers ...
With more than 90% of actively managed stock funds failing to beat the
S&P 500, 1998 was a particularly frustrating year for most fund managers.
Nevertheless, we spent the fourth quarter making sure that the managers
investing your money were sticking to their disciplines, and not allowing the
market's volatility and lack of breadth to blur their investment processes. We
are happy to report that in virtually all instances, our managers remained
focused and looked at the market's wide swings as great investment
opportunities.
... And for Us
We can point to the irrational behavior of the market for not meeting
our expectations for each fund. But the fact is that we had our share of
mistakes and frustrating moments over the past year. Despite a fairly accurate
economic analysis, in hindsight, we made some poor asset allocation decisions.
We also may have been overly concerned with current market valuations relative
to historic norms. This led to a lower allocation in the top-performing sectors
last year. We've taken steps to address these issues which we believe will
result in improved performance on both an absolute and a relative basis.
Despite this critical self-evaluation, we are very confident in the
quality and depth of our research. We continue to be applauded by fund managers
for our thorough and insightful research. Our staff continues to meet with
managers in their offices, at our office, at conferences, and via phone. Over
the past year we've installed numerous computer programs and developed a
database of fund information that allows us to quickly hone in on funds that
require our immediate attention.
We expect volatility to continue, and top stock pickers should be
rewarded going forward. Thank you for the confidence and trust you have shown in
our funds.
Sincerely,
/s/ ERIC
Eric M. Kobren
President and Portfolio Manager
Kobren Growth Fund (12/31/98)
Kobren Growth Fund (Ticker: KOGRX): Both large- and small- cap stocks
experienced a bounce in the fourth quarter as the S&P 500 rebounded 21.3% and
the Russell 2000 rose 16.3%. The recovery was very narrow as investors continued
to favor growth stocks over value stocks. For the year, Kobren Growth
underperformed the large-cap benchmarks due to our focus on smaller, value-
oriented funds. We committed to this area of the market for its attractive
pricing. However, this sector never received as much investor attention as we
felt it deserved. Trouble in Asia and slowing profit growth weakened investor
confidence, shifting focus to the larger and better-known growth companies
regardless of their lofty valuations.
Two star performers of 1998, Janus Twenty and Artisan International,
held top positions in the portfolio throughout the year. While accounting for
approximately 30% of assets, these two funds drove performance in the fourth
quarter as Janus Twenty surged 29.7% and Artisan International increased 24.9%.
Both funds are managed by pure bottom-up stock pickers, one concentrated in the
U.S. and the other in Europe.
Major changes throughout the past year were the elimination of our real
estate position as well as an increased emphasis on larger-cap growth and value
funds. We've continued to focus on concentrated funds run by savvy stock
pickers, and these managers know their holdings very well. We expect these funds
to excel in a choppy 1999.
[Double Line Chart]
Value of $10,000 invested 12/16/96
12 Months Annualized
Ended Since Inception
Total Return (%) 12/31/98 (12/16/96)
Kobren Growth +11.5 +14.3
S&P 500 +28.7 +32.0
[Pie Chart]
Asset Allocation*
Bonds 5%
Cash & Other Assets 7%
International 16%
U.S. Stocks 72%
[Pie Chart]
Style Allocation*
Sector 3%
Bonds 5%
Cash & Other Assets 7%
International 16%
Small Cap Value 17%
Large Cap Growth 20%
Large Cap Value 32%
Top Holdings*
Kobren Growth Style Alloc(%)
- ------------- ----- --------
Oakmark Large Cap Value 18.5
Janus Twenty Large Cap Growth 14.7
Longleaf Partners Large Cap Value 13.8
Longleaf Partners Small Cap Small Cap Value 9.4
Artisan International International 8.1
Artisan International Inst'l Class International 7.6
Marsico Growth & Income Large Cap Growth 5.7
U.S. Treasury Strip, 3.21% 8/15/20 Bonds 4.7
Dreyfus Cash Management Plus Money Market 4.4
Neuberger & Bergman Genesis Trust Small Cap Value 4.2
Oakmark Small Cap Small Cap Value 3.6
Fidelity Select Air Transportation Sector 2.7
Total Fund Assets $64,506,745
[Bar Chart]
Top Sectors**
(Total may not equal 100%)
Services 28.7
Financial 16.4
Ind. Cyclicals 13.6
Technology 11.7
Cons. Staples 8.7
Health 8.1
Cons. Durables 8.0
Energy 2.2
Retail 1.7
Utilities 0.9
* Based on total investments.
** Equities only.
Kobren Moderate Growth Fund (12/31/98)
Kobren Moderate Growth Fund (Ticker: KOMGX): After a very successful 1997
(+23.3%), Kobren Moderate Growth had a disappointing year (+3.4%) as our
aversion to overpriced market sectors largely kept us away from 1998's biggest
winners. Our 25% allocation to bonds (flat for the quarter), 5% in real estate,
and a more value-oriented approach did not pay off in a market where investors
bid technology-oriented and Internet stocks into the stratosphere.
Bright spots in the portfolio this year were Tweedy, Browne Global
Value, along with Marsico Growth & Income. The management team of Tweedy, Browne
Global Value concentrated in household finance and basic cyclicals, which are
trading at large discounts to book value. On the growth side, Tom Marsico of
Marsico Growth & Income favored pharmaceuticals and regional banks, leading to a
stellar first year (+43.4%) for this fund. Although we dramatically reduced our
exposure to real estate in the fourth quarter, this sector has not regained the
investor attention it had in 1996 and 1997. Also, the portfolio's allocation to
U.S. Treasuries, while minimizing volatility, could not keep pace with the
spectacular equity market returns.
Looking ahead to 1999, we expect volatility will remain, if not
increase. Given the more risk-averse charter of this fund, we remain committed
to staying well-diversified, while concentrating on managers who have proven
their stock-picking prowess. As evidenced by our 11% fourth quarter gain, this
fund contains plenty of firepower while remaining prudently invested.
[Double Line Chart]
Value of $10,000 invested 12/24/96
12 Months Annualized
Ended Since Inception
Total Return (%) 12/31/98 (12/24/96)
Kobren Moderate Growth +3.4 +13.1
S&P 500 +28.7 +29.7
[Pie Chart]
Asset Allocation*
Cash 2%
International 16%
Bonds 23%
U.S. Stocks 59%
[Pie Chart]
Style Allocation*
Cash 2%
Real Estate 6%
Small Cap Value 10%
International 16%
Large Cap Value 21%
Large Cap Growth 22%
Bonds 23%
Top Holdings*
Kobren Moderate Growth Style Alloc(%)
- ---------------------- ----- --------
Tweedy, Browne Global Value International 15.6
Longleaf Partners Large Cap Value 11.2
Skyline Special Equities Small Cap Value 10.2
MAS Pooled Value Large Cap Value 10.0
Marsico Growth & Income Large Cap Growth 8.6
PIMCo Cadence Capital App Inst'l Large Cap Growth 8.3
Longleaf Partners Realty Real Estate 5.6
Fidelity Adv Growth Opp'ty, CI.T Large Cap Growth 4.9
Treasury Note, 6.50% 08/15/05 Bond 4.1
Treasury Note, 7.50% 02/15/05 Bond 3.7
Treasury Note, 7.25% 08/15/04 Bond 3.6
Treasury Note, 8.125% 08/15/19 Bond 3.6
Treasury Note, 5.625% 11/30/99 Bond 2.7
Treasury Note, 6.00% 02/15/26 Bond 2.3
Treasury Note, 7.00% 07/15/06 Bond 1.8
Dreyfus Cash Management Plus Money Market 1.8
Vang. Interm-Term Treas. Bond 1.7
Total Fund Assets $46,957,981
[Bar Chart]
Top Sectors**
(Total may not equal 100%)
Services 22.9
Financial 18.8
Ind. Cyclicals 16.5
Cons. Staples 9.0
Technology 8.5
Health 8.4
Retail 8.2
Cons. Staples 3.7
Energy 2.8
Utilities 1.2
* Based on total investments.
** Equities only, excludes real estate funds.
Kobren Conservative Allocation Fund (12/31/98)
Kobren Conservative Allocation Fund (Ticker: KOCAX): Despite a very strong
fourth quarter for a fund with a conservative charter (+8.5%), we were only able
to eke out single digit gains for the year (+3.4%). Our value-oriented bias hurt
the fund as investors continued to flock to growth stocks at almost any price.
The largest contributions to performance in 1998 were from Marsico
Growth & Income (+43.4%), Gabelli Westwood Equity (+13.1%), and Longleaf
Partners Small Cap (+12.7%). Tom Marsico's approach for Marsico Growth & Income
combines a macro-economic analysis with bottom-up stock selection. Gabelli
Westwood Equity manager, Susan Byrne, has positioned her portfolio in more
defensive, less growth-oriented areas. Also, while small-cap value funds didn't
shine this year, we owned one of the best in Longleaf Partners Small Cap.
Although the bond holdings did not help during the strong fourth
quarter rally, we were pleased with their contribution to total return for most
of the year. We continue to hold bonds, as we don't expect interest rates to
dramatically increase and can enjoy the income and stability they bring to the
portfolio. If 1999 is as volatile as we expect, this portion of the portfolio
should serve as an anchor during a very uncertain period.
[Double Line Chart]
Value of $10,000 invested 12/30/96
12 Months Annualized
Ended Since Inception
Total Return (%) 12/31/98 (12/30/96)
Kobren Conservative Allocation +3.4 +11.5
S&P 500 +28.7 +29.7
[Pie chart]
Asset Allocation*
Cash 2%
International 11%
Bonds 35%
U.S. Stocks 52%
[Pie Chart]
Style Allocation*
Cash 2%
Real Estate 5%
International 11%
Large Cap Growth 11%
Small Cap Value 10%
Large Cap Value 26%
Bonds 35%
Top Holdings*
Kobren Conservative Allocation Style Alloc(%)
- ------------------------------ ----- --------
Marsico Growth & Income Large Cap Growth 11.3
Franklin Mutual Beacon, Cl. Z Large Cap Value 10.6
Tweedy, Browne Global Value International 10.6
Fidelity Value Large Cap Value 9.9
Treasury Note, 7.25% 08/15/04 Bond 9.4
Treasury Bond, 8.125% 08/15/19 Bond 8.5
Treasury Note, 7.50% 02/15/05 Bond 5.8
Gabelli Westwood Equity Large Cap Value 5.2
Third Avenue Value Small Cap Value 5.2
Longleaf Partners Small Cap Small Cap Value 5.0
Morgan Stanley Inst'l Real
Estate, Cl. A Real Estate 4.9
Treasury Note, 7.00% 07/15/06 Bond 4.3
PIMCo Total Return Inst'l Bond 2.9
Treasury Bond, 6.00% 02/15/26 Bond 2.8
Dreyfus Cash Management Plus Money Market 1.9
Treasury Note, 6.50% 08/15/05 Bond 1.4
Total Fund Assets $19,709,986
[Bar Chart]
Top Sectors**
(Total may not equal 100%)
Financial 20.9
Services 19.0
Ind. Cyclicals 17.4
Technology 10.4
Cons. Durables 10.2
Health 6.0
Energy 5.9
Retail 4.5
Cons. Staples 4.3
Utilities 1.4
* Based on total investments.
** Equities only, excludes real estate funds.
Kobren Insight Management, Inc. is the registered investment adviser for the
Kobren Insight Funds, and Kobren Insight Brokerage, Inc., a NASD broker/dealer,
is the distributor for the Funds. Performance data reflects past performance and
is not a guarantee of future results. Cumulative total return figures include
reinvestment of all distributions. Investment return and principal value will
fluctuate with market conditions and an investor's shares when redeemed may be
worth more or less than their original cost. International investing has special
risks, including currency fluctuation, political and economic instability, and
the volatility of emerging markets. The adviser absorbs certain expenses of each
Kobren Insight Fund, without which total return would have been lower. Portfolio
holdings are also subject to change. Copyright c1999. Reproductions in whole or
in part are prohibited except by permission. Data sources: Kobren Insight
Management, Inc. and Morningstar. Postmaster: Send address changes to Kobren
Insight Funds, PO Box 5146, Westborough, MA 01581-9936. This report must be
preceded or accompanied by a prospectus. Please read it carefully before
investing. You may obtain a prospectus by calling a Kobren Insight Fund
representative at 1-800-4KOBREN (1-800-456-2736) or by visiting www.kobren.com.
Portfolio of Investments
Kobren Growth Fund
December 31, 1998
SHARES MUTUAL FUNDS - 92.70% VALUE (Note 1)
Large Cap Value - 32.37%
366,091 Longleaf Partners Fund $8,928,967
333,601 Oakmark Fund 11,949,597
20,878,564
Large Cap Growth - 20.44%
178,093 Janus Twenty Fund 9,492,365
257,644 Marsico Growth & Income Fund 3,694,601
13,186,966
Small Cap Value - 17.11%
275,293 Longleaf Partners Small-Cap Fund 6,042,683
132,742 Neuberger & Berman Genesis Trust 2,699,979
155,147 Oakmark Small Cap Fund 2,291,527
11,034,189
International - 15.69%
325,193 Artisan International Fund 5,242,105
302,373 Artisan International Fund,
Institutional Class 4,877,277
10,119,382
Money Market Fund - 4.36%
2,815,251 Dreyfus Cash Management Plus Fund 2,815,251
Sector Fund - 2.66%
67,781 Fidelity Select Air Transportation Fund 1,714,867
Small Cap Growth - 0.07%
1,712 RBB Fund Inc. Numeric Growth Fund 22,579
1,479 RBB Fund Inc. Numeric Investors Micro Cap 24,873
47,452
Total Mutual Funds
(Cost $53,294,435) $59,796,671
PRINCIPAL AMT U.S. TREASURY STRIP - 4.71% (Cost $3,055,006)
$10,000,000 3.210%, 8/15/20 3,037,100
TOTAL INVESTMENTS
(Cost $56,349,501*) 97.41% 62,833,771
OTHER ASSETS AND LIABILITIES
(Net) 2.59% 1,672,974
NET ASSETS 100.00% $64,506,745
*For Federal income tax purposes, cost is $56,590,403 and
appreeciation/(depreciation) is as follows:
Unrealized appreciation: $7,596,392
Unrealized depreciation: (1,353,024)
Net unrealized appreciation: $6,243,368
Unaudited Tax Information
Kobren Growth Fund paid $1,309,372 in long term capital gains for the fiscal
year ended 12/31/98.
See Notes to Financial Statements
Portfolio of Investments
Kobren Moderate Growth Fund
December 31, 1998
SHARES MUTUAL FUNDS - 78.02% VALUE (Note 1)
Large Cap Growth - 21.83%
45,419 Fidelity Advisor Growth Opportunities
Fund, Class T $2,280,486
282,481 Marsico Growth & Income Fund 4,050,774
157,184 PIMCo Cadence Capital Appreciation
Fund, Institutional Class 3,920,164
10,251,424
Large Cap Value - 21.21%
216,105 Longleaf Partners Fund 5,270,795
324,037 MAS Pooled Value Fund 4,688,820
9,959,615
International - 15.63%
436,486 Tweedy, Browne Global Value Fund 7,341,689
Small Cap Value - 10.22%
242,748 Skyline Special Equities Fund 4,801,565
Real Estate - 5.57%
179,608 Longleaf Partners Realty Fund 2,613,292
Money Market Fund - 1.81%
849,560 Dreyfus Cash Management Plus Fund 849,560
Bond - 1.75%
73,593 Vanguard Intermediate-Term
Treasury Fund 819,825
Total Mutual Funds
(Cost $35,573,679) $36,636,970
PRINCIPAL AMT U.S. TREASURY OBLIGATIONS - 21.71%
U.S. Treasury Notes - 15.83%
$1,250,000 5.625% 11/30/99 1,261,621
1,500,000 7.250% 08/15/04 1,683,516
1,500,000 7.500% 02/15/05 1,714,570
1,750,000 6.500% 08/15/05 1,920,762
750,000 7.000% 07/15/06 852,480
7,432,949
U.S. Treasury Bonds - 5.88%
1,000,000 6.000% 02/15/26 1,091,836
1,250,000 8.125% 08/15/19 1,667,383
2,759,219
Total U.S. Treasury Obligations
(Cost $9,645,369) 10,192,168
TOTAL INVESTMENTS
(Cost $45,219,048*) 99.73% 46,829,138
OTHER ASSETS AND LIABILITIES
(Net) 0.27% 128,843
NET ASSETS 100.00% $46,957,981
*For Federal income tax purposes, cost is $45,373,673 and
appreciation/(depreciation) is as follows:
Unrealized appreciation: $2,775,778
Unrealized depreciation: (1,320,313)
Net unrealized appreciation: $1,455,465
Unaudited Tax Information
Kobren Moderate Growth Fund paid $1,048,296 in long term capital gains for the
fiscal year ended 12/31/98.
See Notes to Financial Statements
Portfolio of Investments
Kobren Conservative Allocation Fund
December 31, 1998
SHARES MUTUAL FUNDS - 67.48% VALUE (Note 1)
Large Cap Value - 25.81%
42,228 Fidelity Value Fund $1,957,279
159,968 Franklin Mutual Beacon Fund,
Class Z 2,098,775
102,569 Gabelli Westwood Equity Fund 1,030,815
5,086,869
Large Cap Growth - 11.29%
155,197 Marsico Growth & Income Fund 2,225,531
International - 10.55%
123,665 Tweedy, Browne Global Value Fund 2,080,054
Small Cap Value - 10.19%
31,717 Third Avenue Value Fund 1,024,152
44,857 Longleaf Partners Small Cap Fund 984,614
2,008,766
Real Estate - 4.86%
75,320 Morgan Stanley Institutional
Real Estate Fund, Class A 957,314
Bond - 2.86%
53,508 PIMCo Total Return Institutional Fund 563,971
Money Market Fund - 1.92%
376,969 Dreyfus Cash Management Plus Fund 376,969
Total Mutual Funds
(Cost $13,256,325) $13,299,474
PRINCIPAL AMT U.S. TREASURY OBLIGATIONS - 32.14%
U.S. Treasury Notes - 20.91%
1,650,000 7.250% 08/15/04 1,851,867
1,000,000 7.500% 02/15/05 1,143,047
250,000 6.500% 08/15/05 274,395
750,000 7.000% 07/15/06 852,480
4,121,789
U.S. Treasury Bonds - 11.23%
1,250,000 8.125% 08/15/19 1,667,384
500,000 6.000% 02/15/26 545,918
2,213,302
Total U.S. Treasury Obligations
(Cost $5,879,003) 6,335,091
TOTAL INVESTMENTS
(Cost $19,135,328*) 99.62% 19,634,565
OTHER ASSETS AND LIABILITIES
(Net) 0.38% 75,421
NET ASSETS 100.00% $19,709,986
*For Federal income tax purposes, cost is $19,208,366 and
appreciation/(depreciation) is as follows:
Unrealized appreciation: $857,527
Unrealized depreciation: ($431,328)
Net unrealized appreciation: $426,199
Unaudited Tax Information
Kobren Conservative Allocation Fund paid $426,542 in long term capital gains for
the fiscal year ended 12/31/98.
See Notes to Financial Statements
Statements of Assets and Liabilities
Kobren Insight Funds
December 31, 1998
Kobren Kobren Moderate Kobren Conservative
Growth Fund Growth Fund Allocation Fund
Assets:
Investments, at value
See accompanying
schedules $62,833,771 $46,829,138 $19,634,565
Cash 165 - -
Dividends receivable 13,724 6,775 2,772
Interest receivable - 238,867 153,598
Receivable for investment
securities sold 1,735,996 - -
Receivable for fund
shares sold 63,136 33,806 5,341
Unamortized organization
costs 12,416 6,208 6,277
Prepaid expenses and other
net assets 19,376 13,910 -
Total assets 64,678,584 47,128,704 19,802,553
Liabilities:
Payable to custodian - 3,492 5,940
Payable for fund shares
redeemed 67,616 60,114 24,212
Distributions payable 20,053 38,252 31,175
Investment advisory
fee payable 31,721 20,511 3,485
Administration fee payable 5,625 5,625 5,625
Transfer agent fees payable 8,000 7,333 4,667
Accrued trustees' fees
and expenses 2,500 2,500 2,500
Accrued expenses and other
payables 36,324 32,896 14,963
Total liabilities 171,839 170,723 92,567
Net Assets $64,506,745 $46,957,981 $19,709,986
- ----------
Investments, at cost $56,349,501 $45,219,048 $19,135,328
NET ASSETS consist of:
Undistributed net
investment income $- $- $-
Accumulated net realized
gain/(loss) on
investments sold 1,357,613 897,914 (560,666)
Net unrealized appreciation
of investments 6,484,270 1,610,090 499,237
Par value (shares of beneficial interest, $.001 per share)
5,144 3,960 1,762
Paid-in capital in excess of par value
56,659,718 44,446,017 19,769,653
NET ASSETS $64,506,745 $46,957,981 $19,709,986
SHARES OUTSTANDING 5,144,196 3,959,727 1,761,910
Net asset value, offering and redemption price per share
$12.54 $11.86 $11.19
See Notes to Financial Statements
Statements of Operations
Kobren Insight Funds
For the Year Ended December 31, 1998
Kobren Kobren Moderate Kobren Conservative
Growth Fund Growth Fund Allocation Fund
INVESTMENT INCOME:
Dividends $421,985 $472,979 $323,338
Interest 53,788 598,393 342,871
Total investment income 475,773 1,071,372 666,209
EXPENSES:
Investment advisory fee 495,612 388,684 165,999
Administration fee 67,500 67,500 67,500
Transfer agent fees 62,136 55,704 42,076
Custodian fees 3,130 3,599 3,441
Professional fees 36,027 31,264 10,828
Trustees' fees and
expenses 11,956 9,874 5,059
Registration and
filing fees 17,452 18,524 16,129
Amortization of organization
costs 4,200 2,100 2,100
Other 11,970 10,173 4,624
Total expenses 709,983 587,422 317,756
Expenses reimbursed
by investment adviser (49,566) (69,479) (96,407)
Other reductions (56,320) (44,404) -
Net expenses 604,097 473,539 221,349
NET INVESTMENT INCOME/
(LOSS) (128,324) 597,833 444,860
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) from
security transactions (1,711,222) (1,938,559) (1,178,310)
Short term capital gain
distributions received 266,876 224,103 140,633
Long term capital gain
distributions received 3,925,774 2,836,492 618,165
Change in unrealized
appreciation/(depreciation)
of securities 3,983,749 (371,379) 346,115
Net realized and unrealized
gain/(loss) on investments 6,465,177 750,657 (73,397)
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $6,336,853 $1,348,490 $371,463
See Notes to Financial Statements
Statements of Changes in Net Assets
Kobren Insight Funds
For the Year Ended December 31, 1998
Kobren Kobren Moderate Kobren Conservative
Growth Fund Growth Fund Allocation Fund
Net investment
income/(loss) $(128,324) $597,833 $444,860
Net realized gain/(loss)
from security transactions (1,711,222) (1,938,559) (1,178,310)
Short term capital gains
distributions received 266,876 224,103 140,633
Long term capital gains
distributions received 3,925,774 2,836,492 618,165
Change in unrealized
appreciation/(depreciation)
of investments 3,983,749 (371,379) 346,115
Net increase in net assets
resulting from operations 6,336,853 1,348,490 371,463
Distribution to shareholders from:
Net investment income and
short term capital gains (138,552) (821,936) (585,493)
Net realized gains
on investments (1,309,372) (1,048,296) (426,542)
Total distributions (1,447,924) (1,870,232) (1,012,035)
Net increase/(decrease)
in net assets from fund
share transactions (2,891,457) 4,098,746 2,875,190
Net increase in net assets 1,997,472 3,577,004 2,234,618
Net Assets:
Beginning of period 62,509,273 43,380,977 17,475,368
End of period $64,506,745 $46,957,981 $19,709,986
Undistributed net investment
income at end of period $- $- $-
Kobren Insight Funds
For the Year Ended December 31, 1998
Kobren Kobren Moderate Kobren Conservative
Growth Fund Growth Fund Allocation Fund
Net investment income $261,121 $656,855 $354,447
Net realized gain/(loss)
on investment (1,716,593) (52,046) 2,902
Short term capital gains
distributions received 1,165,983 946,535 459,166
Long term capital gains
distributions received 2,169,928 1,102,350 470,684
Change in unrealized appreciation
of investments 2,499,144 1,981,333 153,396
Net increase in net assets
resulting from operations 4,379,583 4,635,027 1,440,595
Distribution to shareholders from:
Net investment income (261,121) (656,929) (354,446)
Short term capital gains (1,165,983) (946,535) (459,166)
Net realized gain/(loss)
on investments (902) (2,027) (47,565)
Total distributions (1,428,006) (1,605,491) (861,177)
Net increase in net assets from
fund share transactions 59,306,348 40,161,231 16,731,225
Net increase in net assets 62,257,925 43,190,767 17,310,643
Net Assets:
Beginning of period 251,348 190,210 164,725
End of period $62,509,273 $43,380,977 $17,475,368
Undistributed net investment
income at end of period $- $- $-
See Notes to Financial Statements
Financial Highlights
Kobren Growth Fund
For the Year For the Year For the Period
Ended Ended Ended
12/31/98(f) 12/31/97 12/31/96(a)
Net asset value - beginning
of period $11.51 $10.24 $10.00
Net investment income/(loss) (0.02) 0.05 - (d)
Short term capital
gains received 0.05 0.22 -
Net realized and unrealized
gains on investments 1.29 1.27 0.24
Net increase in net assets
resulting from investment
operations 1.32 1.54 0.24
Distributions from net
investment income - (0.05) -
Distributions from short term
capital gains received (0.03) (0.22) -
Distributions from net realized
long term capital gains (0.26) 0.00 (d) -
Total distributions (0.29) (0.27) -
Net asset value - end of
period $12.54 $11.51 $10.24
Total return (b) 11.45% 15.03% 2.40%
Ratios to average net assets/supplemental data:
Net assets, end of period
(in 000's) $64,507 $62,509 $251
Ratio of net investment income/(loss)
to average net assets -0.19% 0.60% -0.97%(c)(e)
Ratio of operating expenses to
average net assets after
reimbursements and reductions 0.91% 0.89% 1.00% (c)
Portfolio turnover rate 62% 43% n/a (e)
Ratio of operating expenses to
average net assets before fees
waived and/or expenses reimbursed
by investment advisor
and other reductions 1.07% 1.28% n/a (e)
(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 Kobren Growth Fund was in operation for a short period of time, these
ratios are not meaningful. (f) Per share net investment income has been
calculated using the monthly average share method.
See Notes to Financial Statements
Financial Highlights
Kobren Moderate Growth Fund
For the Year For the Year For the Period
Ended Ended Ended
12/31/98 12/31/97 12/31/96(a)
Net asset value - beginning
of period $11.94 $10.06 $10.00
Net investment income/(loss) 0.16 0.19 0.00 (d)
Short term capital
gains received 0.06 0.27 -
Net realized and unrealized
gains on investments 0.20 1.88 0.06
Net increase in net assets
resulting from investment
operations 0.42 2.34 0.06
Distributions from net
investment income (0.16) (0.19) -
Distributions from short term
capital gains received (0.06) (0.27) -
Distributions from net realized
long term capital gains (0.28) 0.00(d) -
Total distributions (0.50) (0.46) -
Net asset value - end of
period $11.86 $11.94 $10.06
Total return (b) 3.44% 23.25% 0.60%
Ratios to average net assets/supplemental data:
Net assets, end of period
(in 000's) $46,958 $43,381 $190
Ratio of net investment income
to average net assets 1.15% 2.76% 8.95%(c)(e)
Ratio of operating expenses
to average net assets after
reimbursements and reductions 0.91% 0.92% 1.00%(c)
Portfolio turnover rate 50% 14% n/a (e)
Ratio of operating expenses to
average net assets before fees
waived and/or expenses reimbursed
by investment advisor
and other reductions 1.13% 1.58% n/a (e)
(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 Kobren Moderate Growth Fund was in operation for a short period
of time, these ratios are not meaningful.
See Notes to Financial Statements
Financial Highlights
Kobren Conservative Allocation Fund
For the Year For the Year For the Period
Ended Ended Ended
12/31/98 12/31/97 12/31/96(a)
Net asset value - beginning
of period $11.39 $9.98 $10.00
Net investment income/(loss) 0.25 0.57 0.00 (d)
Short term capital
gains received 0.08 0.04 -
Net realized and unrealized
gains on investments 0.05(f) 1.44 (0.02)
Net increase in net assets
resulting from investment
operations 0.38 2.05 (0.02)
Distributions from net
investment income (0.25) (0.57) -
Distributions from short term
capital gains received (0.08) (0.04) -
Distributions from net realized
long term capital gains (0.25) (0.03) -
Total distributions (0.58) (0.64) -
Net asset value - end of
period $11.19 $11.39 $9.98
Total return (b) 3.36% 20.64% -0.20%
Ratios to average net assets/supplemental data:
Net assets, end of period
(in 000's) $19,710 $17,475 $165
Ratio of net investment income/(loss)
to average net assets 2.01% 3.99% -1.00%(c)(e)
Ratio of operating expenses
to average net assets after
reimbursements and reductions 1.00% 1.00% 1.00%(c)
Portfolio turnover rate 68% 13% n/a (e)
Ratio of operating expenses to
average net assets before fees
waived and/or expenses reimbursed
by investment advisor 1.44% 2.82% n/a (e)
(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 Kobren Conservative Allocation Fund was in operation for a short
period of time, these ratios are not meaningful.
(f) The amount shown for a share outstanding does not correspond with the
aggregate net loss on investments for the period ended due to the
timing of sales and repurchases of fund shares in relation to
fluctuating market values of the investments of the fund.
See Notes to Financial Statements
Notes to Financial Statements
Kobren Insight Funds
December 31, 1998
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, 1998, the Trust
offers shares of four funds, Kobren Growth Fund, Kobren Moderate Growth Fund,
Kobren Conservative Allocation Fund and Kobren Delphi Value Fund (individually,
a "fund" and collectively, the "funds"). Information presented in these
financial statements pertains only to Kobren Growth Fund, Kobren Moderate Growth
Fund and Kobren Conservative Allocation Fund. These funds seek to achieve their
investment objectives by investing primarily in shares of other investment
companies ("underlying funds"), but also may invest directly in securities that
are suitable investments for that fund.
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 -- The
underlying funds are valued according to their stated net asset value. Each
fund's other 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 or under the direction of 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 due primarily 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. Interest income is recognized on the
accrual basis.
Federal Income Tax -- Each fund has qualified and intends to continue to qualify
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its earnings to its shareholders. Therefore,
no federal income or excise tax provision is applicable.
Expenses -- Expenses of the Trust which are directly identifiable to a specific
fund are allocated to that fund. 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"). The Advisory
Agreement provides that each fund pays KIM a fee, computed daily and paid
monthly, at the annual rate of 0.75% of each fund's average daily net assets. In
addition, certain 12b-1 fee and sub-transfer agent fee reimbursement will be
used to defray the costs associated with participation in certain no transaction
fee programs. KIM has voluntarily agreed to limit each fund's other operating
expenses to 0.25% of each fund's average daily net assets until January 1, 2001.
The Trust also 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. Boston Safe Deposit and Trust Company, an indirect wholly-owned
subsidiary of Mellon Bank Corporation, serves as the Trust's custodian. Kobren
Insight Brokerage, Inc., an affiliate of KIM, serves as distributor of the
funds' shares and pays all distribution costs. No distribution fees are paid by
the funds.
For the year ended December 31, 1998, expense reimbursement and other
reductions are as follows:
Expenses Reimbursed
By Investment
Advisor Other Reductions (1)
Kobren Growth Fund $49,566 $56,320
Kobren Moderate Growth Fund 69,479 44,404
Kobren Conservative Allocation Fund 96,407 -
(1) Payments made by an underlying fund or its investment advisor, based on
shares held by a Kobren Insight Fund.
No officer, director or employee of KIM, Kobren Insight Brokerage,
Inc., 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. Purchases and Sales
The aggregate amounts of purchases and sales of underlying funds and
investment securities, other than U.S. government and short-term securities, for
the year ended December 31, 1998, were as follows:
Purchases Sales
Kobren Growth Fund $39,528,990 $42,122,247
Kobren Moderate Growth Fund 32,105,786 25,154,303
Kobren Conservative Allocation Fund 18,394,556 14,481,960
4. Shares of Beneficial Interest
As of December 31, 1998, 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:
Year Ended Year Ended
December 31, 1998 December 31, 1997
Shares Amount Shares Amount
Kobren Growth Fund:
Shares Sold 2,046,221 $24,949,435 6,040,941 $66,750,421
Shares Issued as Reinvestment
of Dividends 114,032 1,429,965 121,905 1,403,131
Shares Redeemed (2,448,666) (29,270,857) (754,794) (8,847,204)
Net Increase/
(Decrease) (288,413) $(2,891,457) 5,408,052 $59,306,348
Kobren Moderate Growth Fund:
Shares Sold 1,885,448 $23,034,304 3,867,539 $43,059,814
Shares Issued as Reinvestment
of Dividends 154,509 1,832,481 130,811 1,561,885
Shares Redeemed (1,713,953) (20,768,039) (383,530) (4,460,468)
Net Increase 326,004 $4,098,746 3,614,820 $40,161,231
Kobren Conservative Allocation Fund:
Shares Sold 1,260,211 $14,740,908 1,763,364 $19,397,323
Shares Issued as Reinvestment
of Dividends 87,053 974,832 71,701 818,115
Shares Redeemed (1,120,082) (12,840,550) (316,837) (3,484,213)
Net Increase 227,182 $2,875,190 1,518,228 $16,731,225
At December 31, 1998, Kobren Insight Management, Inc. and its
affiliates owned 838,024, 485,712 and 369,573 shares of Kobren Growth Fund,
Kobren Moderate Growth Fund and Kobren Conservative Allocation Fund,
respectively.
5. Organization Expenses
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 Kobren Insight 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, KIM 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 KIM must
then, in some instances, select alternative investments.
7. Capital Loss Carryforward
For the year ended December 31, 1998, the Kobren Conservative
Allocation Fund had a capital loss carryforward of $487,627 expiring December
31, 2006.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of Kobren Insight Funds:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Kobren Growth Fund, Kobren
Moderate Growth Fund and The Kobren Conservative Allocation Fund (The "Funds")
at December 31, 1998, and the results of their operations, the changes in net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999
