Message To Shareholders
After Another Strong Year, Fundamentals Remain Intact
I'm pleased to present you with our 1999 annual report as we wrap up a
tremendous decade for stock fund investors. While I don't think the last five
years 28% average annual return for the S&P 500 Index will be repeated over the
next five years, we do have many reasons to be optimistic about the general
direction of the securities markets heading into the next millennium. There are
some factors that suggest a bumpy road lies ahead, but first let me summarize
the positives.
Economic growth in the U.S. over the past year has been more robust
than we, and most economists, expected. By the time fourth quarter figures are
tallied, instead of the 2% growth rate we anticipated, the economy will have
probably grown at a 4% or even 5% rate. Unemployment has remained remarkably
low, close to a 4% level. And inflation, while up from last year, remains
unusually low given the robust economic growth we've experienced since 1990.
Another positive is that corporate earnings grew at a remarkable 18% in
1999, after declining in 1998. Demand for stocks remains high as investors
continue to fund retirement accounts and trade stocks and mutual funds through
the internet. Finally, companies in more mundane, but predictable industries are
currently selling at very attractive levels. The value fund managers we speak
with are eager to tell us about good companies they are finding that are selling
at less than 10 times earnings. It reminds me of 1982, when I was finding
attractive companies selling for 5, 6 or 7 times current year's earnings.
Foreign Markets Can't Be Ignored
Economic growth outside the U.S. also improved last year. The Pacific
Basin bounced back from its 1998 liquid-ity crisis, and the Japanese economy
began to gradually recover from its 10-year slump. In Europe, economic unity is
taking hold. In addition to increasing economic activity, an acceleration in
merger and acquisition activity and technological enhancements are beginning to
result in productivity improvements similar to those experienced in the U.S.
over the past five years.
Fed Could Spoil The Party
Not everything is rosy. The Federal Reserve (Fed) increased interest
rates three times in 1999, and is set to raise rates again in early February.
Higher rates are obviously bad for bond funds (they experienced their worst year
since 1994). Will the Fed be able to keep inflation in check, while keeping
economic growth chugging along? They've been able to pull it off for nine years
straight, but a misstep could occur as the drivers of economic growth undergo
funda-mental shifts. The Fed may (as they've often done in the past) raise rates
too much and cause an economic slow-down or recession. Or, they may let growth
get out of hand, and be faced with uncontrolled inflation.
Diversification May Hold The Key in 2000
Looking forward to 2000 we see continued enthusiasm for stocks and
stock funds. Given strong economic growth and appealing valuations, we are still
convinced that some exposure to value funds is warranted. We are also quite
excited about overseas markets and may selectively increase international
exposure. Finally, we remain very cautious on the interest rate front, as strong
economic growth could send long-term interest rates to 7%, or higher. If this
happens, we also have to be prepared for the potential negative impact it would
likely have on the equity markets.
We had some disappointments in 1999, but we have been pleased with the
overall performance of the funds we've invested in on your behalf. It is
important to realize that some of our holdings performed poorly because of their
investment style, and not manager ineptitude. As proof that investment styles
matter, renowned investor Warren Buffett found his Berkshire Hathaway stock
declining 19.8% for the year. While everyone knows that technology drove the
market last year, the gap between value and growth stocks was unprecedented.
Going forward, we remain confident that a diversified approach is the most
prudent course of action at this stage in the market. While we have an excellent
stable of mutual fund managers working for us, we won't hesitate to make
adjustments if market and economic conditions change. We appreciate having you
as a shareholder and look forward to being part of your investment program for
many years.
Sincerely,
/s/ Eric M. Kobren
Eric M. Kobren
President and Portfolio Manager
<PAGE>
[Line Chart for Value of $10,000 invested 12/16/99]
[Pie Chart for Asset Allocation]
[Pie Chart for Style Allocation]
Kobren Growth Fund (Ticker: KOGRX): The fourth quarter of 1999 capped off a
spectacular decade for equity fund investors. Kobren Growth gained 20.5% for the
quarter bringing 1999's total return to 29.7%, outpacing both the DJIA and S&P
500 Index, as well as the 24% average return for growth oriented funds of funds
as tracked by Lipper Analytical Services.
A number of strategic asset allocation shifts contributed to last
year's impressive results. We completely eliminated our bond position as we
adopted a "strengthening economy" scenario. We also increased the growth sector
while decreasing our percentage of value funds. Two growth funds that stood out
in 1999 were Janus Twenty and Fidelity Aggressive Growth. Also, Artisan
International was near the top of its peer group.
In 1999, Janus Twenty (which comprised between 10% and 17% of the fund)
appreciated a remarkable 64.9%. Manager Scott Schoelzel rode the technology wave
as that sector accounted for over 50% of his assets by year end. Fidelity
Aggressive Growth employed a similar strategy as Erin Sullivan continues to
impress. Our holding grew from 3% at the end of September to 16% by the end of
the year. The timing was fortunate as the fund surged 48.3% in the fourth
quarter alone. Artisan International (which comprised between 10% and 17% of
this year's portfolio) gained 81.3% in 1999 by emphasizing technology and
developing communication stocks. Our diversified portfolio is well positioned
for a volatile 2000.
<TABLE>
<S> <C> <C>
Top Ten Holdings
Kobren Growth Style Alloc (%)
Artisan International International 17.5
Janus Twenty Large Cap Growth 17.4
Fidelity Aggressive Growth Large Cap Growth 16.4
Longleaf Partners Mid Cap Value 13.4
Marsico Growth & Income Large Cap Growth 12.9
Longleaf Partners Small Cap Small Cap Value 9.2
Fidelity Large Cap Growth 5.9
Fidelity Select Energy Service Small Cap Growth 3.7
Fidelity Select Health Care Large Cap Growth 3.6
Dreyfus Cash Management Plus Cash 1.3
Total Fund Assets $73,151,338
</TABLE>
[Bar Chart for Top Sectors]
Kobren Growth Fund
December 31, 1999
Large Cap Growth - 56.27%
201,085 Fidelity Aggressive Growth Fund $ 1,990,712
102,088 Fidelity Fund 4,349,978
21,186 Fidelity Select Health Care Portfolio 2,644,386
152,941 Janus Twenty Fund 12,759,900
430,975 Marsico Growth & Income Fund 9,421,114
41,166,090
International - 17.49%
448,332 Artisan International Fund, Inst'l. Class 12,790,911
Mid Cap Value - 13.43%
479,378 Longleaf Partners Fund 9,822,450
Small Cap Value - 9.23%
334,145 Longleaf Partners Small Cap Fund 6,749,733
Small Cap Growth - 3.79%
108,696 Fidelity Select Energy Service Portfolio 2,707,609
1,755 RBB Fund Inc. Numeric Inv Growth Fund 33,748
1,962 RBB Fund Inc. Numeric Inv Micro Cap Fund 33,444
2,774,801
Money Market Fund - 1.27%
932,371 Dreyfus Cash Management Plus Fund 932,371
Total Mutual Funds
(Cost $56,108,085) 74,236,356
TOTAL INVESTMENTS
(Cost $56,108,085*) 101.48% 74,236,356
NET OTHER ASSETS
AND LIABILITIES -1.48% (1,085,018)
TOTAL NET ASSETS 100.00% $ 73,151,338
*For Federal income tax purposes, cost is $56,423,680 and appreciation
(depreciation) is as follows:
Unrealized appreciation: $20,587,604
Unrealized depreciation: ($2,774,928)
Net unrealized appreciation: $17,812,676
Kobren Moderate Growth Fund
December 31, 1999
Large Cap Growth - 49.20%
79,922 Fidelity Fund $ 3,405,457
64,593 Fidelity Growth Company Fund 5,445,220
513,039 Marsico Growth & Income Fund 11,215,022
20,065,699
International - 14.75%
297,580 Tweedy, Browne Global Value Fund 6,014,102
Mid Cap Value - 9.26%
184,309 Longleaf Partners Fund 3,776,490
Large Cap Value - 7.70%
258,974 MAS Pooled Value Fund 3,141,354
Small Cap Value - 7.05%
142,389 Longleaf Partners Small Cap Fund 2,876,261
Bond - 2.85%
117,524 PIMCo Total Return Institutional Fund 1,163,485
Money Market Fund - 1.33%
541,281 Dreyfus Cash Management Plus Fund 541,281
Total Mutual Funds
(Cost $32,241,693) 37,578,672
U.S. Treasury Notes - 8.65%
$ 650,000 7.250%, 08/15/04 670,719
2,500,000 7.500%, 02/15/05 2,605,078
250,000 6.500%, 08/15/05 249,668
3,525,465
Total U.S. Treasury Obligations
(Cost $3,582,528) 3,525,465
TOTAL INVESTMENTS
(Cost $35,824,221*) 100.79% 41,104,137
NET OTHER ASSETS
AND LIABILITIES -0.79% (320,168)
TOTAL NET ASSETS 100.00% $40,783,969
*For Federal income tax purposes, cost is $35,954,126 and appreciation
(depreciation) is as follows:
Unrealized appreciation: $6,859,057
Unrealized depreciation: ($1,709,046)
Net unrealized appreciation: $5,150,011
<PAGE>
Statements of Assets and Liabilities
Kobren Insight Funds
For the Year Ended December 31, 1999
<TABLE>
<S> <C> <C>
Kobren
Kobren Moderate
Growth Fund Growth Fund
ASSETS:
Investments, at value
See accompanying schedules $74,236,356 $41,104,137
Interest and dividend receivable 6,991 99,707
Receivable for fund shares sold 30,801 --
Unamortized organization costs 8,216 4,108
Prepaid expenses and other net assets 1,493 4,610
Total assets 74,283,857 41,212,562
LIABILITIES:
Payable for fund shares redeemed 192,428 56,040
Dividends payable 853,863 322,470
Investment advisery fee payable 41,784 18,358
Accrued Trustees' fees and expenses 3,862 2,342
Accrued expenses and other payables 40,582 29,383
Total liabilities 1,132,519 428,593
NET ASSETS $73,151,338 $40,783,969
Investments, at cost $56,108,085 $35,824,221
NET ASSETS consist of:
Accumulated net realized gain on investments sold $2,801,860 $2,062,059
Net unrealized appreciation of investments 18,128,271 5,279,916
Par value (Shares of beneficial interest,
$0.001 per share) 4,769 3,133
Paid-in capital in excess of par value 52,216,438 33,438,861
NET ASSETS $73,151,338 $40,783,969
SHARES OUTSTANDING 4,768,667 3,132,944
Net asset value, offering and redemption
price per share $15.34 $13.02
</TABLE>
<PAGE>
Statements of Operations
Kobren Insight Funds
For the Year Ended December 31, 1999
<TABLE>
<S> <C> <C>
Kobren
Kobren Moderate
Growth Fund Growth Fund
INVESTMENT INCOME:
Dividends $337,150 $300,783
Interest 83,928 324,912
Total investment income 421,078 625,695
EXPENSES:
Investment advisory fee 493,644 302,425
Administration fee 67,500 67,500
Transfer agent fees 54,293 42,491
Custodian fees 3,044 3,268
Professional fees 27,411 32,257
Trustees' fees and expenses 19,593 10,827
Registration and filing fees 13,003 13,142
Amortization of organization costs 4,200 2,100
Other 20,612 15,086
Total expenses 703,300 489,096
Expenses reimbursed by investment adviser (45,010) (85,805)
Other reductions (10,912) (21,901)
Net expenses 647,378 381,390
NET INVESTMENT INCOME (LOSS) (226,300) 244,305
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from security transactions 1,828,303 1,291,233
Short term capital gain distributions received 672,939 224,923
Long term capital gain distributions received 3,386,572 1,632,320
Change in unrealized appreciation of securities 11,644,001 3,669,826
Net realized and unrealized gain on investments 17,531,815 6,818,302
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $17,305,515 $7,062,607
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C>
Kobren Growth Fund
Year Ended December 31,
1999 1998
-----------------------------
Net investment loss $(226,300) $(128,324)
Net realized gain (loss) from security transactions 1,828,303 (1,711,222)
Short term capital gain distributions received 672,939 266,876
Long term capital gain distributions received 3,386,572 3,925,774
Change in unrealized appreciation of investments 11,644,001 3,983,749
Net increase in net assets resulting from operations 17,305,515 6,336,853
Distribution to shareholders from:
Net investment income and short term capital gains (446,672) (138,552)
Net realized gains on investments (3,770,595) (1,309,372)
Total distributions (4,217,267) (1,447,924)
Net decrease in net assets from fund share
transactions (4,443,655) (2,891,457)
Net increase in net assets 8,644,593 1,997,472
NET ASSETS:
Beginning of period 64,506,745 62,509,273
End of period $73,151,338 $64,506,745
Kobren Moderate Growth Fund
Year Ended December 31,
1999 1998
-----------------------------
Net investment income $ 244,305 $ 597,833
Net realized gain (loss) from security transactions 1,291,233 (1,938,559)
Short term capital gain distributions received 224,923 224,103
Long term capital gain distributions received 1,632,320 2,836,492
Change in unrealized appreciation of investments 3,669,826 (371,379)
Net increase in net assets resulting from operations 7,062,607 1,348,490
Distribution to shareholders from:
Net investment income and short term capital gains (469,256) (821,936)
Net realized gains on investments (1,759,380) (1,048,296)
Total distributions (2,228,636) (1,870,232)
Net decrease in net assets from fund share
transactions (11,007,983) 4,098,746
Net increase (decrease)in net assets (6,174,012) 3,577,004
NET ASSETS:
Beginning of period 46,957,981 43,380,977
End of period $40,783,969 $ 46,957,981
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
Kobren Growth Fund
For a fund share outstanding throughout the period.
<TABLE>
<S> <C> <C> <C> <C>
For the Year For the Year For the Year For the Period
Ended Ended Ended Ended
12/31/99 12/31/98 (f) 12/31/97 12/31/96 (a)
Net asset value-- beginning of period $12.54 $11.51 $10.24 $10.00
Net investment income (loss) (0.04) (0.02) 0.05 --
(d)
Short term capital gains 0.14 0.05 0.22 --
Net realized and unrealized gains
on investments 3.63 1.29 1.27 0.24
Net increase in net assets resulting from
investment operations 3.73 1.32 1.54 0.24
Distributions from net investment income -- -- (0.05) --
Distributions from net realized short term
capital gains (0.10) (0.03) (0.22) --
Distributions from net realized capital gains (0.83) (0.26) -- (d) --
Total distributions (0.93) (0.29) (0.27) --
Net asset value-- end of period $15.34 $12.54 $11.51 $ 10.24
Total return (b) 29.70% 11.45% 15.03% 2.40%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $73,151 $64,507 $62,509 $251
Ratio of net investment income (loss)
to average net assets (0.34)% (0.19)% 0.60% (0.97)%(c)(e)
Ratio of operating expenses to average net
assets before fees waived and/or expenses
reimbursed by investment adviser and
other reductions 1.07% 1.07% 1.28% n/a(e)
Ratio of operating expenses to average net
assets after reimbursements and reductions 0.98% 0.91% 0.89% 1.00%
(c)
Portfolio turnover rate 66% 62% 43% n/a(e)
</TABLE>
(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.
<PAGE>
FINANCIAL HIGHLIGHTS
Kobren Moderate Growth Fund
For a fund share outstanding throughout the period.
<TABLE>
<S> <C> <C> <C> <C>
For the Year For the Year For the Year For the Period
Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96 (a)
Net asset value-- beginning of period $11.86 $11.94 $10.06 $10.00
Net investment income 0.09 0.16 0.19 -- (d)
Short term capital gains 0.07 0.06 0.27 --
Net realized and unrealized gains
on investments 1.75 0.20 1.88 0.06
Net increase in net assets resulting from
investment operations 1.91 0.42 2.34 0.06
Distributions from net investment income (0.08) (0.16) (0.19) --
Distributions from net realized short term
capital gains (0.08) (0.06) (0.27) --
Distributions from net realized capital gains (0.59) (0.28) --(d) --
Total distributions (0.75) (0.50) (0.46) --
Net asset value-- end of period $13.02 $11.86 $11.94 $10.06
Total return (b) $16.06% 3.44% 23.25% 0.60%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $40,784 $46,958 $43,381 $190
Ratio of net investment income to
average net assets 0.61% 1.15% 2.76% 8.95%(c)(e)
Ratio of operating expenses to average net assets
before fees waived and/or
expenses reimbursed by investment adviser and
other reductions 1.21% 1.13% 1.58% n/a (e)
Ratio of operating expenses to average net
assets after reimbursements and reductions 0.95% 0.91% 0.92% 1.00%(c)
Portfolio turnover rate 57% 50% 14% n/a (e)
</TABLE>
(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.
<PAGE>
Notes to Financial Statements
Kobren Insight Funds
December 31, 1999
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. Effective May 28, 1999, Kobren
Moderate Growth Fund acquired the assets and certain of the liabilities of
Kobren Conservative Allocation Fund, in a tax-exempt reorganization. As of
December 31, 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 Kobren Growth Fund and Kobren
Moderate Growth Fund (individually, a "fund" and collectively, the "funds").
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 primary securities exchange or national securities market on
which such securities 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. Each fund will distribute net realized capital gains if any (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 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. 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 Advisery 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. 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 has also entered into an administration agreement (the
"Administration Agreement") with PFPC Inc. (formerly known as First Data
Investor Services Group, Inc.) (the "Administrator"), an indirect wholly-owned
subsidiary of PNC Bank Corp. The Administrator also serves as the Trust's
transfer agent and dividend paying agent. Prior to December 1, 1999, the
services described above were provided by First Data Investor Services Group,
Inc., a wholly-owned subsidiary of First Data Corporation. On that date, PFPC
Trust Company, a wholly-owned subsidiary of PFPC Worldwide, Inc., and an
indirect wholly-owned subsidiary of PNC Bank Corp., acquired all of the
outstanding stock of First Data Investor Services Group, Inc. and as part of the
transaction, PFPC Inc. was merged into First Data Investor Services Group, Inc.
which then changed its name to PFPC Inc. Boston Safe Deposit and Trust Company,
an indirectly wholly-owned subsidiary of Mellon Bank Corporation, serves as the
Trust's custodian. Kobren Insight Brokerage, Inc. ("KIB"), an affiliate of KIM,
serves as distributor of the funds' shares and bears all distribution costs. No
distribution fees are paid by the funds.
For the year ended December 31, 1999, expense reimbursement and other
reductions are as follows:
<TABLE>
<S> <C> <C>
ExpensesReimbursed
By Investment Adviser Other Reductions (1)
Kobren Growth Fund $ 45,010 $ 10,912
Kobren Moderate Growth Fund 85,805 21,901
</TABLE>
(1) Receipt of 12b-1 distribution fees paid by certain fund investments held
in the portfolios owned by the funds.
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. Sub-Transfer Agent Fees
The funds are subject to sub-transfer agent fees consisting of
broker-dealer and fund network fees at an annual rate of up to 0.10% of the
average daily balances of accounts invested through those networks.
4. Purchases and Sales
The aggregate amounts of purchases and sales of underlying funds and
investment securities, other than short-term securities, for the year ended
December 31, 1999, were as follows:
<TABLE>
<S> <C> <C>
Purchases Sales
U.S. Government Other U.S. Government Other
Kobren Growth Fund $ 545,648 $ 41,251,269 $ 3,285,875 $38,781,803
Kobren Moderate Growth Fund -- 22,579,409 10,903,945 36,094,580
</TABLE>
5. Shares of Beneficial Interest
As of December 31, 1999, an unlimited number of shares of beneficial
interest, par value $0.001, was authorized for the Trust. Changes in shares of
beneficial interest were as follows:
<TABLE>
<S> <C> <C>
Year Ended December 31, 1999 Year Ended December 31, 1998
Shares Amount Shares Amount
Kobren Growth Fund:
Shares sold 1,303,646 $ 18,015,548 2,046,221 $ 24,949,435
Shares issued as reinvestment of distributions 219,206 3,362,783 114,032 1,429,965
Shares redeemed (1,898,381) (25,821,986) (2,448,666) (29,270,857)
Net decrease (375,529) $ (4,443,655) (288,413) $ (2,891,457)
Kobren Moderate Growth Fund:
Shares sold 306,806 $ 3,806,795 1,885,448 $ 23,034,304
Shares issued in connection with
reorganization (Note 8) 1,259,682 14,316,241 -- --
Shares issued as reinvestment of distributions 146,353 1,905,573 154,509 1,832,481
Shares redeemed (2,539,624) (31,036,592) (1,713,953) (20,768,039)
Net increase (decrease) (826,783) $ (11,007,983) 326,004 $ 4,098,746
</TABLE>
At December 31, 1999, KIM and its affiliates owned 1,123,015 and 423,380 shares
of Kobren Growth Fund and Kobren Moderate Growth Fund, respectively.
6. 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.
7. 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 for the fund.
8. Reorganization
At a meeting held on April 12, 1999, the Board of Trustees approved an
Agreement and Plan of Reorganization (the "Agreement") between Kobren Moderate
Growth Fund and Kobren Conservative Allocation Fund. On May 28, 1999, Kobren
Moderate Growth Fund acquired the assets and certain liabilities of the Kobren
Conservative Allocation Fund. The reorganization was structured for tax purposes
to qualify as a tax-free reorganization under the Internal Revenue Code. Prior
to the reorganization, the total shares issued by, the value of the shares
issued by, and the total net assets of the Kobren Moderate Growth Fund were
2,343,540, $29,270,820 and $29,261,266, respectively. The total net assets
contributed by the Kobren Conservative Allocation Fund were $15,736,961
(including $1,420,720 of unrealized appreciation). The total net assets of the
Kobren Moderate Growth Fund after reorganization were $44,998,227.
9. Tax Information (unaudited)
During the fiscal year ended December 31, 1999, Kobren Growth Fund and
Kobren Moderate Growth Fund made distributions from long term capital gains of
$3,770,595 and $1,759,380, respectively. The percentage of income from direct
obligations of the U.S. Government in Kobren Growth Fund, Kobren Moderate Growth
Fund and Kobren Conservative Allocation Fund was 13%, 41% and 85% respectively.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Kobren Insight Funds:
In our opinion, the accompanying statement 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 Kobren Growth Fund and Kobren
Moderate Growth Fund (the "Funds") at December 31, 1999, the results of their
operations, the changes in their net assets and the financial highlights for the
periods indicated therein, in conformity with accounting principles generally
accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
BOSTON, MASSACHUSETTS
PRICEWATERHOUSECOOPERS LLP
FEBRUARY 10, 2000
<PAGE>
Dear Shareholder,
In 1999 we observed a major bifurcation in the US equity markets. The new
economy stocks comprising high technology, telecommunications, and internet
rallied to nosebleed valuations while leading the S&P 500 Index to a 21.0% gain.
Conversely, the old economy stand-bys encompassing manufacturing, consumer
staples, and financial services languished.
The top ten contributors in the S&P 500 Index (e.g., Intel, Microsoft, Cisco
Systems) returned 38.8% on average. The removal of the 30% technology weighting
in the S&P 500 Index would have caused a 3.1% decline in the overall market
index. Given our small cap value approach, Kobren Delphi Value Fund (Retail
Class +11.3% and Institutional Class +11.6%) performed creditably, far outpacing
both the Russell 2500 Value (+1.5%) and the Russell 2000 Value (-1.5%) indices
in 1999.
At year end, the Fund reached $53.8 million in assets with 96.2% equity
exposure, a median weighted market capitalization of $2.14 billion, and roughly
half of the portfolio invested in new economy holdings. Mirroring the
aforementioned dynamics of the two tier marketplace, the second half winners
(with second half performance while owned by the fund noted) emanated from the
telecommunications (U.S. Cellular: +88.7%; Liberty Media: +54.6%),
semi-conductor equipment (Kulicke & Soffa: +75.6%; Cohu: +75.3%), and chip
manufacturing (Kemet: +59.4%; LSI Logic: +46.3%) sectors.
Unfortunately, the specter of accelerating inflation induced Chairman Alan
Greenspan to raise the federal funds rate three times in the second half of
1999, triggering a sell-off in financial service companies, particularly
regional banks. The Federal Reserve's desired slowdown in consumer spending
propelled major declines in retail and auto related issues. Hence, many
outstanding businesses like Ross Stores and Dana Corporation finished the year
at single digit multiples of estimated 2000 earnings.
While we are not economists at Delphi Management, we believe that 2000
should prove to be another healthy year for the U.S. economy. Led by the
consumer, real gross domestic product should advance 3 1/2 to 4%, inflation
should rise to the 2 1/2 to 3% level, and U.S. corporate profits should climb 8
to 10% for the year. Nonetheless, it is important to distinguish between the
economy, as a whole, and the stock market. Equities, as measured by the S&P 500
Index, are not cheap at 26x forecast year 2000 earnings. The narrow leadership
is highly reminiscent of the "nifty-fifty" era of the early 1970's. While Cisco,
EMC and Sun Microsystems are great franchises, 75+ multiples are unsustainable.
Even more disturbing is the tulip mania amongst the internet universe. It is
difficult to understand the multibillion dollar capitalizations assigned to
companies with negligible revenues (e.g., Commerce One, Sycamore and Akamai) and
negative earnings.
Although I cannot promise you the return to favor of value investing in year
2000, I can assure you that we will adhere rigorously to our stated guidelines
of pur-chasing solid businesses at either low price/earnings or price/breakup
valuations. We shall continue to work hard for you in order to earn your trust.
Very truly yours,
/s/ Scott M. Black
Scott M. Black
Portfolio Manager
<PAGE>
[Value of $10,000 invested 12/23/98 Line Chart]
Total Return
12 Months Annualized
Ended Since Inception
12/31/99 (12/23/98)
Retail Class (KDVRX) +11.30% +12.35%
Institutional Class (KDVIX) +11.61% +12.66%
Russell 2000 Value -1.49% +2.02%
Net Asset Value 12/31/99
Retail Class $11.19
Institutional Class $11.20
Total Net Assets
$53,818,070
Top Ten Equity Holdings
Security Sector Alloc (%)
Kulicke & Soffa Indus., Inc. Aerospace/Technology 2.06%
LSI Logic Corp. Aerospace/Technology 1.94%
Goldman Sachs Group, Inc. Financial Services 1.93%
United States Cellular Corp. Publishing & Broadcasting 1.86%
Pittway Corp., Class A Conglomerates 1.72%
Comcast Corp., Class A Publishing & Broadcasting 1.69%
Viacom, Inc., Class B Publishing & Broadcasting 1.64%
LTX Corp. Aerospace/Technology 1.62%
Cox Comm., Inc., Class A Publishing & Broadcasting 1.60%
Arrow Electronics, Inc. Aerospace/Technology 1.58%
[Pie Chart for Sectors]
[Pie Chart for Asset Allocation]
Delphi Management, Inc. is the sub-adviser responsible for the day-to-day
portfolio management of Kobren Delphi Value Fund and Kobren Insight Brokerage,
Inc., a NASD broker/dealer, is the distributor of the fund. Performance data
reflect past performance and are not a guarantee of future returns. Total return
figures include reinvestment of all distributions. Investment returns and
principal values fluctuate with changing market conditions, so that when
redeemed, shares may be worth more or less than their original cost. The Russell
2000 Value Index is an unmanaged index of common stocks. The adviser absorbed
certain expenses of the fund, without which the total return would be lower.
Portfolio holdings and percentages of the fund may change at any time. An
institutional class of shares is also available. This report must be preceded or
accompanied by a prospectus. 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.
COMMON STOCKS - 95.98%
Advertising - 1.12%
1,500 Grey Advertising, Inc. $ 600,000
Aerospace/Technology - 18.43%
33,500 Arrow Electronics, Inc. (1) 850,062
14,000 Avnet, Inc. 847,000
27,000 Cohu, Inc. 837,000
16,000 Hubbell, Inc.(Class B) 436,000
16,700 Kemet Corp. (1) 752,544
26,100 Kulicke & Soffa Industries, Inc. (1) 1,110,881
10,500 Litton Industries, Inc. (1) 523,687
15,500 LSI Logic Corp. (1) 1,046,250
39,000 LTX Corp. (1) 872,625
47,300 SpeedFam-IPEC, Inc. (1) 611,944
14,500 Tech-Sym Corp. (1) 299,062
67,000 Teledyne Technologies, Inc. (1) 632,313
12,100 Thomas & Betts Corp. 385,688
21,000 Varian Semicon. Equip. Assoc., Inc.(1) 714,000
9,919,056
Banking - 7.05%
8,000 Bank of America Corp. 401,500
42,250 Colonial BancGroup, Inc. 438,344
19,400 Community Bank System 448,625
31,500 First Essex Bancorp, Inc. 452,812
11,500 First Union Corp. 377,344
1,400 North Fork Bancorporation, Inc. 24,500
30,000 Peoples Heritage Financial Group 451,875
42,900 Sovereign Bancorp, Inc. 319,739
11,500 Union Planters Corp. 453,531
18,000 Webster Financial Corp. 424,125
3,792,395
Conglomerates - 7.71%
386 Berkshire Hathaway, Inc., Class B (1) 706,380
12,400 Honeywell International, Inc. 715,325
18,550 National Service Industries, Inc. 547,225
14,000 Norsk Hydro A/S Sponsored, ADR 598,500
20,700 Pittway Corp., Class A 927,619
27,000 St. Joe Co. 656,438
4,151,487
Construction & Real Estate - 4.47%
43,000 D. R. Horton, Inc. 593,937
25,000 Lennar Corp. 406,250
14,500 Smith (Charles E.) Res. Realty, Inc. 512,938
9,000 Southdown, Inc. 464,625
22,600 Sovran Self Storage, Inc. 427,987
2,405,737
Consumer Related - 3.23%
26,400 Disney (Walt) Co. 772,200
20,000 Hilfiger (Tommy) Corp. (1) 466,250
29,200 Polo Ralph Lauren Corp. (1) 498,225
1,736,675
Energy - 6.45%
30,000 Cabot Oil & Gas Corp. 481,875
47,000 Cross Timbers Oil Co. 425,938
12,500 Devon Energy Corp. 410,937
31,500 Global Marine, Inc. (1) 523,688
23,500 Santa Fe International Corp. 608,063
66,900 Santa Fe Snyder Corp. (1) 535,200
14,500 Unocal Corp. 486,656
3,472,357
Financial Services - 4.14%
14,684 Bear Stearns Cos., Inc. 627,741
11,670 Donaldson Lufkin & Jenrette, Inc., NW 564,536
11,000 Goldman Sachs Group, Inc. 1,036,062
2,228,339
Food & Beverage - 3.25%
10,500 Coca-Cola Bottling Co. 497,438
30,000 Pepsi Bottling Group, Inc. 496,875
51,500 Ryan Family Steak Houses, Inc. (1) 437,750
25,000 Schultz Sav-O Stores, Inc. 318,750
1,750,813
Insurance - 3.70%
9,300 Chubb Corp. 523,706
25,600 IPC Holdings, Ltd. 380,800
13,300 Renaissance Re Holdings, Ltd. 543,637
10,500 XL Capital, Ltd., Class A 544,688
1,992,831
Manufacturing - 5.25%
29,000 AK Steel Holding Corp. 547,375
15,500 Arvin Industries, Inc. 439,812
20,300 Banta Corp. 458,019
14,100 Dana Corp. 422,119
14,000 Lear Corp. (1) 448,000
10,200 SIFCO Industries, Inc. 70,763
15,500 Trinity Industries, Inc. 440,781
2,826,869
Publishing & Broadcasting - 25.95%
14,000 AT & T Corp.-Liberty Media Group (1) 794,500
15,900 Central Newspapers, Inc., Class A 626,062
26,500 Charter Comm., Inc., Class A (1) 579,687
18,000 Comcast Corp., Class A 910,125
16,700 Cox Communications, Inc., Class A (1) 860,050
9,600 Gannett, Inc. 783,000
21,000 Hearst-Argyle Television, Inc. (1) 559,125
10,000 Jones Intercable, Inc., Class A (1) 693,125
11,500 Knight Ridder, Inc. 684,250
21,200 Lee Enterprises, Inc. 677,075
16,000 McClatchy Co., Class A 692,000
9,500 McGraw-Hill Cos., Inc. 585,438
21,600 News Corp., Ltd, ADR 826,200
26,500 Penton Media, Inc. 636,000
13,100 Scripps (E.W.) Co., Class A 587,044
11,000 Time Warner, Inc. 796,813
9,900 United States Cellular Corp. (1) 999,281
14,600 Viacom, Inc., Class B (1) 882,387
1,423 Washington Post, Class B 791,010
13,963,172
Retail - 5.23%
26,200 Claire's Stores, Inc. 586,225
14,000 Federated Department Stores, Inc. (1) 707,875
16,500 May Department Stores Co. 532,125
30,000 Ross Stores, Inc. 538,125
29,000 Saks, Inc. (1) 451,313
2,815,663
Total Common Stocks 51,655,394
(Cost $47,803,557)
INVESTMENT COMPANY - 3.80%
2,043,048 Dreyfus Cash Mgmt. Plus Fund 2,043,048
Total Investment Company 2,043,048
(Cost $2,043,048)
Total Investments - 99.78% 53,698,442
(Cost $49,846,605*)
Net Other Assets
and Liabilities - 0.22% 119,628
Total Net Assets - 100.00% $ 53,818,070
(1) Non-income producing.
ADR American Depositary Receipt.
*For Federal income tax purposes, cost is $49,846,605 and
appreciation/(depreciation) is as follows:
Unrealized appreciation: $8,478,550
Unrealized depreciation: ($4,626,713)
Net unrealized appreciation: $3,851,837
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
Assets:
Investments, at value
See accompanying schedules $ 53,698,442
Dividends receivable 38,539
Interest receivable 6,779
Receivable for investments sold 204,373
Receivable for fund shares sold 76,500
Prepaid expenses 1,494
Total assets 54,026,127
Liabilities:
Payable for investment securities purchased 17,571
Payable for fund shares redeemed 115,235
Investment advisory fee payable 43,770
Distribution fee payable 5,559
Accrued trustees' fees and expenses 2,967
Accrued expenses and other payables 22,955
Total liabilities 208,057
Net Assets $ 53,818,070
Investments, at cost $ 49,846,605
Net Assets consist of:
Accumulated net realized loss on investments sold $ (179,185)
Net unrealized appreciation of investments 3,851,837
Par value (Shares of beneficial interest, $0.001 per share) 4,808
Paid-in capital in excess of par value 50,140,610
Net Assets $ 53,818,070
Computation of net asset value
Retail Class Shares:
Net asset value, offering and redemption price
per share ($31,054,985 / 2,774,808 shares) $ 11.19
Institutional Class Shares:
Net asset value, offering and redemption price
per share ($22,763,085 / 2,033,166 shares) $ 11.20
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME:
Dividends, net (withholding tax of $341) $ 701,712
Total investment income 701,712
EXPENSES:
Investment advisory fee 400,343
Administration fee 72,500
Transfer agent fees 56,375
Sub-transfer agent fee (Retail Class) 8,074
Custodian fees 20,512
Professional fees 23,343
Trustees' fees and expenses 10,992
Registration and filing fees 38,859
Distribution fees (Retail Class) 55,796
Other 6,720
Total expenses 693,514
Fees waived and/or expenses reimbursed by investment adviser
and administrator (37,203)
Net expenses 656,311
NET INVESTMENT INCOME 45,401
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from security transactions 143,370
Change in unrealized appreciation of securities 3,793,277
Net realized and unrealized gain on investments 3,936,647
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,982,048
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C>
For the Period
December 23, 1998
For the Year Ended (commencement of operations)
December 31, 1999 to December 31, 1998
Net investment income $ 45,401 $ 803
Net realized gain from security transactions 143,370 --
Change in unrealized appreciation of investments 3,793,277 58,560
Net increase in net assets resulting from operations 3,982,048 59,363
Distribution to shareholders from:
Retail Shares:
Net investment income (5,356) --
Net realized gains on investments (81,845) --
Distributions in excess of net realized gains on investments (105,633) --
Total distributions (192,834) --
Institutional Shares:
Net investment income (46,306) --
Net realized gains on investments (61,525) --
Distributions in excess of net realized gains on investments (79,407) --
Total distributions (187,238) --
Total distributions to shareholders (380,072) --
Net increase in net assets from fund share transactions 44,888,495 5,268,236
Net increase in net assets 48,490,471 5,327,599
Net Assets:
Beginning of period 5,327,599 --
End of period $ 53,818,070 $ 5,327,599
Undistributed net investment income at end of period $ -- $ 5,678
</TABLE>
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<S> <C> <C>
RETAIL CLASS CHARES
For the Period
December 23, 1998
For the Year Ended (commencement of operations)
December 31, 1999 to December 31, 1998
Net asset value - beginning of period $ 10.12 $ 10.00
Net investment income 0.00 (c)(d) 0.01
Net realized and unrealized gain on investments 1.14 0.11
Net increase in net assets resulting from investment operations 1.14 0.12
Distributions from net investment income -- (d) --
Distributions from net realized capital gains (0.03) --
Distributions in excess of net realized capital gains (0.04) --
Total distributions (0.07) --
Net asset value-- end of period $ 11.19 $ 10.12
Total return (a) 11.30% 1.20%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 31,055 $ 5,056
Ratio of net investment income/(loss) to average net assets 0.00% 0.82%(b)
Ratio of operating expenses to average net assets before fees waived and/or
expenses reimbursed by investment
adviser and administrator 1.86% 10.91%(b)
Ratio of operating expenses to average net assets
after waivers and/or expense reimbursements 1.75% 1.75%(b)
Portfolio turnover rate 17% 0%
(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 year. (d) The selected amounts are less then $0.005.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<S> <C> <C>
INSTITUTIONAL CLASS SHARES
For the Period
December 23, 1998
For the Year Ended (commencement of operations)
December 31, 1999 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 1.14 0.11
Net increase in net assets resulting from investment operations 1.17 0.12
Distributions from net investment income (0.02) --
Distributions from net realized capital gains (0.03) --
Distributions in excess of net realized capital gains (0.04) --
Total distributions (0.09) --
Net asset value-- end of period $ 11.20 $10.12
Total return (a) 11.61% 1.20%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 22,763 $ 272
Ratio of net investment income/(loss) to average net assets 0.25% 1.07%(b)
Ratio of operating expenses to average net assets before fees waived and/or
expenses reimbursed by investment
adviser and administrator 1.57% 10.66%(b)
Ratio of operating expenses to average net assets
after waivers and/or expense reimbursements 1.50% 1.50%(b)
Portfolio turnover rate 17% 0%
(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 year.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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, 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 Kobren Delphi Value Fund ("fund"). The fund is
authorized to issue two classes of shares - the Retail Class and the
Institutional Class. Each class of shares has 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 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. 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 "Adviser") who
has engaged Delphi Management, Inc. ("Delphi") as the fund's subadviser. 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 subadviser 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 year ended December 31, 1999, the Adviser reimbursed management and
other fees amounting to $22,239.
The Trust has also entered into an administration agreement (the
"Administration Agreement") with PFPC Inc. (formerly known as First Data
Investor Services Group, Inc.) (the "Administrator"), an indirect wholly-owned
subsidiary of PNC Bank Corp. The Administrator also serves as the Trust's
transfer agent and dividend paying agent. Prior to December 1, 1999, the
services described above were provided by First Data Investor Services Group,
Inc., a wholly-owned subsidiary of First Data Corporation. On that date, PFPC
Trust Company, a wholly-owned subsidiary of PFPC Worldwide, Inc., and an
indirect wholly-owned subsidiary of PNC Bank Corp., acquired all of the
outstanding stock of First Data Investor Services Group, Inc. and as part of the
transaction, PFPC Inc. was merged into First Data Investor Services Group, Inc.
which then changed its name to PFPC Inc. Boston Safe Deposit and Trust Company,
an indirect and wholly owned subsidiary of Mellon Bank Corporation, serves as
the Trust's custodian. Kobren Insight Brokerage, Inc. ("KIB"), an affiliate of
KIM, serves as distributor of the fund.
For the year ended December 31, 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 inc1urred 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 1940 Act. 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 transacting shareholder orders, at an annual rate of
up to 0.10% of the average daily balance of fund accounts invested through those
networks. Currently, all sub-transfer agent fees have been reimbursed by the
Adviser to maintain the expense limitation of 1.75% that has been set on the
Retail Class of the Fund. As of December 31, 1999, the sub-transfer agent fees
that were reimbursed by the Adviser amounted to $8,074, which is included in the
amount noted above.
5. Purchases and Sales
The aggregate amounts of purchases and sales of the fund's investment
securities, other than short-term securities, for the year ended December 31,
1999, were $51,436,265 and $5,955,247 of non-governmental issues, respectively.
6. Shares of Beneficial Interest
As of December 31, 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>
<S> <C> <C>
Year Ended December 31, 1999 Period Ended December 31, 1998
Shares Amount Shares Amount
Retail Class:
Shares Sold 2,796,694 $ 29,759,359 499,444 $ 4,999,226
Shares Issued as
Reinvestment of Distributions 14,152 154,824 -- --
Shares Redeemed (535,482) (5,720,041) -- --
Net Increase 2,275,364 $ 24,194,142 499,444 $ 4,999,226
Institutional Class:
Shares Sold 2,523,893 $ 26,186,423 26,849 $ 269,010
Shares Issued as Reinvestment of Distributions 16,221 177,451 -- --
Shares Redeemed (533,797) (5,669,521) -- --
Net Increase 2,006,317 $ 20,694,353 26,849 $ 269,010
At December 31, 1999, KIM, Delphi and its affiliates owned 700,085 Retail
Class shares of the fund.
</TABLE>
7. Post October Losses
Under current tax laws, certain capital losses realized after October 31 may
be deferred and treated as occurring on the first day of the following fiscal
year. For the fiscal year ended December 31, 1999, the fund elected to defer
losses occurring between November 1, 1999 and December 31, 1999 in the amount of
$179,185.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Kobren Insight Funds:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio 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 Delphi Value Fund (the
"Fund") at December 31, 1999, the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated therein, in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's 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 auditing standards generally accepted in the United States, 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, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts
PricewaterhouseCoopers LLP
February 10, 2000
