<PAGE>
[LOGO OF KOBRICK CENDANT FUNDS APPEARS HERE]
P.O. Box 8075
Boston
Massachusetts
02266.8075
www.kcfund.com
1.888.KCFUND1
1.888.523.8631
Investment Advisor
Kobrick Cendant Funds, Inc.
Trustees and Officers
Frederick R. Kobrick,
President and Trustee
Michael T. Carmen,
Treasurer and Trustee
Jay H. Atlas,
Trustee
Samuel L. Hayes, III,
Trustee
Joseph P. Paster,
Trustee
Richard A. Goldman,
Secretary
Distributor
Funds Distributor, Inc.
Transfer and Shareholder
Servicing Agent
Boston Financial Data Services, Inc.
Administrator, Accounting Agent
and Custodian
State Street Bank and Trust Company
Independent Auditors
PricewaterhouseCoopers LLP
Legal Counsel
Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
KOBRICK CENDANT FUNDS OFFER A VARIETY OF SERVICES TO MAKE INVESTING EASIER AND
MORE CONVENIENT FOR YOU.
~ TRADITIONAL AND ROTH IRAS.
~ AUTOMATIC INVESTMENT AND REDEMPTION PLANS.
~ AUTOMATED TELEPHONE SERVICES FOR PRICES AND ACCOUNT BALANCES 24 HOURS A
DAY, 7 DAYS PER WEEK.
~ REPRESENTATIVE-ASSISTED SERVICES 8 AM TO 6 PM ET.
~ WEB SITE WITH DAILY FUND PRICES AND PERFORMANCE, PROSPECTUS AND
APPLICATIONS, MANAGER PROFILES, MARKET OUTLOOK AND MORE.
~ UNLIMITED EXCHANGES BETWEEN FUNDS; EXCHANGES ALSO PERMITTED BETWEEN KOBRICK
CENDANT FUNDS AND SSGA(SM) US GOVERNMENT MONEY MARKET FUND.
~ WRITTEN CONFIRMATION OF EACH TRANSACTION AND QUARTERLY ACCOUNT STATEMENTS.
~ AVAILABLE THROUGH MANY FUND SUPERMARKETS.
September
<PAGE>
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
President's Message ................................................. 2
Kobrick Cendant Capital Fund
Management's Discussion and Analysis ............................. 4
Fund Profile ..................................................... 5
Schedule of Investments .......................................... 6
Kobrick Cendant Emerging Growth Fund
Management's Discussion and Analysis ............................. 8
Fund Profile ..................................................... 9
Schedule of Investments .......................................... 10
Kobrick Cendant Growth Fund
Management's Discussion and Analysis ............................. 12
Fund Profile ..................................................... 13
Schedule of Investments .......................................... 14
Financial Statements
Statements of Assets and Liabilities ............................. 16
Statements of Operations ......................................... 17
Statements of Changes in Net Assets .............................. 18
Financial Highlights ............................................. 19
Notes to Financial Statements ....................................... 20
Report of Independent Accountants ................................... 25
The information contained in this report is intended for the general information
of the shareholders of the Funds. Due to active management, there is no
guarantee that a Fund currently invests or will continue to invest in the
securities listed in this report. This report is not authorized for distribution
to prospective investors unless preceded or accompanied by a current prospectus
which contains important information concerning the Funds. Please read the
prospectus carefully before investing. To obtain a prospectus, please call
1-888-KCFUND1 (1-888-523-8631).
1 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
[PHOTO APPEARS HERE]
Dear Fellow Shareholder:
Kobrick Cendant Funds began its operations in a year filled with global
economic uncertainty, as well as market challenges and opportunities. We believe
that our funds performed extremely well in this environment, and we are most
pleased to report the investment results for our first fiscal year ended
September 30, 1998. In addition to launching the Kobrick Cendant Capital Fund
and Emerging Growth Fund on January 2, 1998, we addressed what we sensed to be
investors' need for a fund focusing exclusively on larger capitalization issues
by launching the Kobrick Cendant Growth Fund on September 1, 1998. This report
presents a perspective on our first fiscal year of operation and our thoughts
regarding the coming year.
At the beginning of 1998, the prevailing attitude among many investors was one
of caution and growing concerns about Asia and weakening corporate earnings.
Yet, until July 20th, the equity markets performed quite well, particularly
consumer cyclicals and technology securities, which we believe were undervalued
in 1997. However, the continuing contagion phenomenon involving Asia, Russia,
and Latin America coupled with fears of a U.S. recession contributed to the
punishment inflicted on our markets, particularly in August. We have experienced
a short, sharp bear market similar in pattern and psychology to the very
damaging market of 1990, and the volatility has been incredibly high, only
adding to investors' apparent consternation over world events and their real or
imagined links to our markets.
Given the above, we believe our funds performed very strongly against their
respective indices. The Emerging Growth Fund ended the nine month period since
its inception with a positive return of 1.4%, significantly exceeding the
Russell 2000 Index (the commonly used index to measure performance of smaller
companies) which had a return of -16.8%. The Capital Fund was up 7.1%, versus
1.05% for the Russell 3000 Index for the nine-month period. The Growth Fund,
which had only one month's performance prior to the fiscal year ending, was up
3.2%. This lagged the S&P 500 for the month (+6.24%), primarily due to our
structuring this new Fund during the month and, accordingly, not being fully
invested during the first few days of September -- a strong period in the
market.
Having managed through all corrections and bear markets since 1971, we have
gained substantial experience and also seen patterns similar to today's
environment exhibited psychologically and financially. As market movement
confirmed during the latter part of October, we believe the declines which hit
hardest in August were not those of a long, fundamentally driven bear market,
but rather a short-term "collapse" (similar to 1987 and 1990). But now, the
decimation that has affected thousands of stocks over a fairly long time period
(hidden by the strong performance of a small number of large companies) has, we
believe, created significantly greater opportunities. This is particularly true
for small and mid-sized companies.
The stories that panicked the market this time are not as bad as those in
1990. Then, the crowd said after the invasion of Kuwait that Saudi Arabia would
fall and we could see an oil embargo similar to the devastating oil embargo of
1973. Many also felt that we would have a severe recession and runaway inflation
at the same time. This panic ultimately resulted in a huge market opportunity.
Today, the contagion story is that more countries will suffer, eventually hurt-
Annual Report 2
<PAGE>
ing U.S. exports and the overall economy to cause a recession in 1999. The
Asian recession was created by excess capital, borrowing, and bank lending in
Korea and Thailand (as well as Japan and other geographies), and weak energy
prices hurt the economies of Mexico, Canada, Russia and Venezuela. However, our
economy is only 11% export-based. Thus, we see weakness in specific sectors
because of the international weakness. More importantly, our economy is
approximately 45% interest rate sensitive and ever-lower interest rates are not
only supporting some sectors today, but because of the lagging effect of the
rate cut, we believe will actually be more supportive to the economy and
financial markets early next year.
Concurrently, we are in somewhat of an earnings recession. Energy, capital
goods, and various sub-sectors of financials and technology are amongst the
worst earnings recession sectors. However, over two-thirds of our economy is
consumer-driven which, despite pockets of weakness and some layoffs, we believe
will remain solid. We call literally hundreds of CEOs with whom we have access,
spanning all sectors, i.e., broadcasting, retail, transportation, finance,
technology, etc. The read and optimism remain quite good from Main Street.
This has been an exciting and rewarding year for our team at Kobrick Cendant.
We continue to believe that our strength lies in the type and breadth of the
quantitative and qualitative analysis we perform. We have found and expect to
continue to find opportunistic buys, particularly in select retailers,
technology and financial stocks. After the "mini crash of 1998," we believe
there is more opportunity for breadth in the markets and investment gains for
our investors than has existed for many years.
During the market turmoil we regularly updated our web site (www.kcfund.com)
----------------
with our commentary. We will continue to keep you informed of market
developments and our outlook by updating our web site, which we encourage you to
visit. While there, you can check the daily performance of each fund. If we can
be of any other assistance, please call us at 1.888.KCFUND1 (1.888.523.8631)
from 8am-6pm ET, Monday-Friday.
We sincerely appreciate your confidence by investing with us.
Very truly yours,
/s/ Frederick R. Kobrick
Frederick R. Kobrick
President and Chief Executive Officer
November 9, 1998
Performance data quoted represents past performance and does not guarantee
future results and reflects a partial waiver of fees without which the total
return would have been lower. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The S&P 500 is an unmanaged index
of 500 publicly traded stocks representing a variety of industries. The Russell
2000 is an unmanaged index of 2000 small capitalization U.S. stocks and is a
commonly used index of U.S. small stock performance. The Russell 3000 is an
unmanaged index of the 3000 largest U.S. companies based on total market
capitalization. Index performance includes reinvestment of dividends. You cannot
invest directly in an index.
3 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
KOBRICK CENDANT CAPITAL FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Performance
- -----------
The Kobrick Cendant Capital Fund commenced operations on January 2, 1998
and finished its first fiscal year on September 30, 1998. We are pleased to
report that the Capital Fund ended the nine month period with a total return of
+7.1%. This return was significantly better than the average performance of the
capital appreciation funds tracked by Lipper Analytical Services, Inc., which
had a -2.89% average return for the same period. The Capital Fund also
outperformed the Russell 3000 Index, which had a +1.05% return for the same
period.
Investment Review
- -----------------
Early in the year we concluded that, given the difficult macroeconomic
environment, investors might shy away from smaller cap stocks and concentrate
their investments in more established companies until a solution to global
problems became more evident. This resulted in our skewing the portfolio of the
Capital Fund towards mid and larger capitalization issues. We believed that this
shift in the market has, to a great extent, been played out and we now see good
valuation and opportunity beyond the large cap sector.
The Capital Fund's performance was positively impacted by our investments
in Internet companies as well as other leading technology companies. Select
retail stocks also drove performance in the Fund as a very healthy U.S. consumer
continued to spend at leading retailers including Staples, Home Depot, and Men's
Wearhouse.
America Online, one of our largest holdings, is the quintessential example
of the impact and power of the Internet on our everyday lives. Each day, over 13
million subscribers can use AOL to access email, the World Wide Web and news,
chat with friends and engage in online commerce. AOL has clearly become a global
consumer brand with almost $3 billion in revenue and earnings growth in excess
of 100%. AOL also illustrates the strength of our buy disciplines in stock
selection. We did not make our investment in AOL until after we completed our
in-depth research and met with AOL's top management to increase our confidence
that AOL had the wherewithal to execute on its new strategy of growing
membership at a slower, but albeit good rate, as it improved the profitability
of the overall enterprise.
Based on the well-documented economic situation in Asia Pacific, the
Capital Fund avoided several sectors whose fortunes are based on strong demand
from that region. For instance, throughout 1998, the Fund had limited holdings
in the energy sector. Following two very strong years for this sector, we
believed that the decline in demand from the Pacific Basin would cause a glut of
oil on the world markets and drive prices down from higher levels attained last
year. We also were underweighted in semiconductor issues, correctly determining
that Asia's problems would impact demand.
Looking Ahead
- -------------
As the strategy for the Capital Fund permits investing in small, mid and
large capitalization companies, this Fund has the ability to be flexible in
various market conditions. Whereas our strategy during the past year was to
focus on mid and larger capitalization companies, we expect that the
opportunities created by the "mini bear market of 1998" will allow us to
continue to add selected small cap and emerging growth companies to our
portfolio.
Annual Report 4
<PAGE>
- --------------------------------------------------------------------------------
KOBRICK CENDANT CAPITAL FUND
FUND PROFILE
- --------------------------------------------------------------------------------
Objective: Maximum capital appreciation
Strategy: Invests in equity securities of companies with small, medium and
large capitalizations, including those considered by the Fund's
investment manager to be undervalued special situations and
emerging growth companies.
Inception Date: January 2, 1998
Manager: Frederick R. Kobrick
TOP TEN HOLDINGS
(as of September 30, 1998)
% of Fund's
net assets
EMC Corp. ....................................................... 4.0
Microsoft Corp. ................................................. 3.9
America Online, Inc. ............................................ 3.8
Cisco Systems, Inc. ............................................. 3.5
Dell Computer Corp. ............................................. 3.3
Yahoo!, Inc. .................................................... 3.3
Wind River Systems, Inc. ........................................ 2.5
Lucent Technologies, Inc. ....................................... 2.4
Qwest Communications
International, Inc. ......................................... 2.3
Eastman Kodak Co. ............................................... 2.3
TOP FIVE INDUSTRIES
(as of September 30, 1998)
% of Fund's
net assets
Computer Software/Services ...................................... 19.9
Retail-Specialty ................................................ 7.4
Computer Hardware ............................................... 6.7
Medical Products & Services ..................................... 6.5
Computers-Networking ............................................ 5.6
The Value of a $10,000 Investment in the
Kobrick Cendant Capital Fund
From its Inception (1/2/98) to Present (9/30/98) as
Compared to the Total Return for the Russell 3000 Index
[LINE GRAPH APPEARS HERE]
Kobrik Cedant
Russell 3000 Capital Fund
Inception Date 1/2/98 $10,000 $10,000
Present Date 9/30/98 $10,105 $10,710
Total Return +7.1%
(since inception 1/2/98 to 9/30/98)
Performance data quoted represents past performance and does not guarantee
future results and reflects a partial waiver of fees without which the total
return would have been lower. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The Russell 3000 is an unmanaged
index of the 3000 largest U.S. companies based on total market capitalization.
Index performance includes reinvestment of dividends. Total return is not
annualized.
5 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
KOBRICK CENDANT CAPITAL FUND
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
September 30, 1998
Company Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 93.5%
BANKS-MONEY CENTER -- 5.1%
BankAmerica Corp. ............................ 4,400 $ 264,550
Chase Manhattan Corp. ........................ 14,200 614,150
Citicorp ..................................... 2,700 250,931
Nationsbank Corp. ............................ 4,900 262,150
----------
1,391,781
----------
BIOTECHNOLOGY -- 2.1%
Biogen, Inc. (a) ............................. 4,300 282,994
Centocor, Inc. (a) ........................... 7,100 281,337
----------
564,331
----------
BROADCAST MEDIA -- 2.9%
Chancellor Media Corp. (a) ................... 11,800 393,825
Clear Channel Communications (a) ............. 8,400 399,000
----------
792,825
----------
COMMUNICATION-EQUIPMENT -- 2.4%
Lucent Technologies, Inc. .................... 9,400 649,187
----------
COMPUTER HARDWARE -- 6.7%
Apple Computer, Inc. (a) ..................... 16,400 625,250
Dell Computer Corp. (a) ...................... 13,800 907,350
International Business Machines .............. 2,400 307,200
----------
1,839,800
----------
COMPUTER SOFTWARE/SERVICES -- 19.9%
America Online, Inc. ......................... 9,300 1,034,625
Citrix Systems, Inc. (a) ..................... 8,800 624,800
Compuware Corp. (a) .......................... 8,200 482,775
HBO & Co. .................................... 16,300 470,663
Microsoft Corp. (a) .......................... 9,800 1,078,612
RealNetworks, Inc. (a) ....................... 5,500 190,781
Wind River Systems, Inc. (a) ................. 14,700 694,575
Yahoo!, Inc. (a) ............................. 6,900 893,550
----------
5,470,381
----------
COMPUTERS-NETWORKING -- 5.6%
Ascend Communications, Inc. (a) .............. 12,600 573,300
Cisco Systems, Inc. (a) ...................... 15,750 973,547
----------
1,546,847
----------
COMPUTERS-PERIPHERAL -- 4.0%
EMC Corp. (a) ................................ 19,000 $1,086,562
----------
DIVERSE -- 1.1%
American Home Products Corp. ................. 5,800 303,775
----------
ELECTRONICS-SEMICONDUCTOR -- 1.4%
Intel Corp. .................................. 4,600 394,450
----------
FINANCIAL(DIVERSE) -- 0.9%
American Express Co. ......................... 3,300 256,163
----------
INSURANCE-MULTILINE -- 1.0%
American International Group, Inc. ........... 3,500 269,500
----------
INVESTMENT BANK/BROKERAGE -- 3.3%
Merrill Lynch & Company, Inc. ................ 12,300 582,712
Morgan Stanley Dean Witter & Co. ............. 7,400 318,663
----------
901,375
----------
MEDICAL PRODUCTS & SUPPLIES -- 6.5%
Merck & Co., Inc. ............................ 3,600 466,425
Pfizer, Inc. ................................. 3,500 370,781
Schering Plough Corp. ........................ 4,600 476,388
Warner - Lambert Co. ......................... 6,200 468,100
----------
1,781,694
----------
PHOTOGRAPH/IMAGING -- 2.3%
Eastman Kodak Co. ............................ 8,200 633,962
----------
RESTAURANTS -- 1.6%
Starbucks Corp. (a) .......................... 12,300 445,106
----------
RETAIL-APPAREL -- 4.7%
Abercrombie & Fitch Co. Cl.A (a) ............. 11,500 506,000
Cutter & Buck, Inc. (a) ..................... 11,100 255,300
Gap, Inc. .................................... 9,900 522,225
----------
1,283,525
----------
RETAIL-BUILDING SUPPLIES -- 2.3%
Home Depot, Inc. ............................... 16,000 632,000
----------
RETAIL-DEPARTMENT STORES -- 0.9%
Family Dollar Stores, Inc. ..................... 16,000 252,000
----------
See Notes to Financial Statements
Annual Report 6
<PAGE>
- --------------------------------------------------------------------------------
KOBRICK CENDANT CAPITAL FUND
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
September 30, 1998
Company Shares Value
- --------------------------------------------------------------------------------
RETAIL-GENERAL MERCHANDISE -- 1.8%
Wal Mart Stores, Inc. ........................ 9,100 $ 497,088
-----------
RETAIL-SPECIALTY -- 7.4%
Amazon.com, Inc. (a) ......................... 4,800 535,800
Bed Bath & Beyond, Inc. (a) .................. 25,200 589,050
eBay, Inc. (a) ............................... 500 22,531
Stage Stores, Inc. (a) ....................... 26,100 318,094
Staples, Inc. (a) ............................ 19,050 559,594
-----------
2,025,069
-----------
SERVICES-
ADVERTISING/MARKETING -- 2.3%
CMG Information Services, Inc. (a) ........... 11,900 633,675
-----------
SERVICES-
COMMERCIAL & CONSUMER -- 2.7%
Century Business Services, Inc. (a) .......... 21,000 427,875
Peapod, Inc. (a) ............................. 62,000 325,500
-----------
753,375
-----------
SERVICES-COMPUTER SYSTEMS -- 1.1%
Keane, Inc. (a) .............................. 8,500 $ 298,563
-----------
TELECOMMUNICATIONS -
LONG DISTANCE -- 3.5%
MCI Worldcom, Inc. (a) ....................... 6,800 332,350
Qwest Communications
International, Inc. (a) ................... 20,300 635,644
-----------
967,994
-----------
Total Common Stocks
(cost $22,432,855) ........................ 25,671,028
-----------
TOTAL INVESTMENTS -- 93.5%
(cost $22,432,855) ......................... 25,671,028
Other assets less liabilities -- 6.5% ........ 1,791,678
-----------
NET ASSETS -- 100% ........................... $27,462,706
===========
(a) Non-income producing security.
See Notes to Financial Statements
7 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
KOBRICK CENDANT EMERGING GROWTH FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Performance
- -----------
Despite the extremely difficult third quarter for the stock market generally
and small capitalization companies in particular, we believe that the Kobrick
Cendant Emerging Growth Fund performed quite well during its first fiscal year,
ending the nine month period with a positive return of +1.4%. This positive
return greatly exceeds the negative performance (-16.52%) of the average of the
624 small capitalization funds tracked by Lipper Analytical Services, Inc. The
Emerging Growth Fund also outperformed the Russell 2000 Index, which was -16.8%
for the same period.
Investment Review
- -----------------
Our performance in this Fund was driven by a combination of good individual
stock selection as well as avoiding industries and sectors that did not perform
well, including energy and semiconductor stocks. Indeed, two specific areas that
the Emerging Growth Fund invested more heavily in were the retail sector and the
Internet.
Early in the year, we believed that despite widespread weakness in Asia
Pacific, the domestic consumer would continue to drive the economy. Accordingly,
the Emerging Growth Fund invested in several stocks well positioned in the
specialty retail sector. For instance, we invested in Bed Bath & Beyond, a
leading home furnishing and merchandise retailer with over 150 stores throughout
the U.S. Our research showed that this company met all three of our buy
disciplines -- good management, strong earnings growth and attractive valuation.
Also, we determined that Guitar Center, operating about 40 musical instrument
stores, had the potential to generate earnings and revenue growth of over 25%
during the next five years driven by strong comparable store sales and new store
openings.
Consumers continue to be enthused about the Internet as a medium for
entertainment, information, and commerce. As access speed improves, we believe
that the Internet may offer the greatest area of growth potential in the
emerging growth sector. Several investments were additive to the Emerging Growth
Fund's performance including Yahoo and Amazon.com. Yahoo, the leading portal
company, has shown that the Internet can be profitable, as it effectively sells
advertising space on its site, adds new services and ramps up electronic
commerce activities. Amazon.com, one of the leading online shopping sites, has
recently expanded its offerings beyond selling books to include music. We
believe that Amazon.com will become the shopping mall of choice for online
shoppers, offering a variety of items purchased easily and priced competitively.
Looking Ahead
- -------------
We believe the "mini bear" market that we recently experienced has and will
continue to create significant buying opportunities, particularly for small
capitalization and emerging growth companies. The poor market performance of
many of these companies started long before the bear market began on July
20th, but it was mostly hidden by the strong performance of a small number of
large companies. It is our expectation that the stocks of these smaller
companies are poised to fare quite well as the stock market as a whole recovers.
Annual Report 8
<PAGE>
- --------------------------------------------------------------------------------
KOBRICK CENDANT EMERGING GROWTH FUND
FUND PROFILE
- --------------------------------------------------------------------------------
Objective: Provide growth in capital
Strategy: Invests in equity securities of emerging growth and small
capitalization companies, which the fund manager believes offers
growth that, over the long-term, far outpaces the economy.
Inception Date: January 2, 1998
Manager: Frederick R. Kobrick
TOP TEN HOLDINGS
(as of September 30, 1998)
% of Fund's
net assets
Yahoo!, Inc. ....................................................... 5.0
Wind River Systems, Inc. ........................................... 4.3
CMG Information Services, Inc. ..................................... 3.5
Bed Bath & Beyond, Inc. ............................................ 3.3
Chancellor Media Corp. ............................................. 3.3
Tweeter Home Entertainment
Group, Inc. ...................................................... 3.3
HealthCare Financial Partners, Inc. ................................ 3.2
Abercrombie & Fitch Co. ............................................ 3.0
Citrix Systems, Inc. ............................................... 3.0
Amazon.com, Inc. ................................................... 3.0
TOP FIVE INDUSTRIES
(as of September 30, 1998)
% of Fund's
net assets
Computer Software/Services ......................................... 17.6
Retail-Specialty ................................................... 14.1
Services-Advertising/Marketing ..................................... 10.1
Retail-Apparel ..................................................... 7.2
Services-Commercial
& Consumer ....................................................... 6.3
The Value of a $10,000 Investment in the
Kobrick Cendant Emerging Growth Fund
From its Inception (1/2/98) to Present (9/30/98) as
Compared to the Total Return for the Russell 2000 Index
[LINE GRAPH APPEARS HERE]
Kobrick Cendant
Russell 2000 Emerging Growth Fund
Inception Date 1/2/98 $10,000 $10,000
Present Date 9/30/98 $8,320 $10,140
Total Return +1.4%
(since inception 1/2/98 to 9/30/98)
Performance data quoted represents past performance and does not guarantee
future results and reflects a partial waiver of fees without which the total
return would have been lower. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The Russell 2000 is an unmanaged
index of 2000 small capitalization U.S. stocks and is a commonly used index of
U.S. small stock performance. Index performance includes reinvestment of
dividends. Total return is not annualized.
9 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
KOBRICK CENDANT EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
September 30, 1998
Company Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 92.7%
BIOTECHNOLOGY -- 2.1%
Biogen, Inc. (a) ............................... 3,000 $ 197,438
Centocor, Inc. (a) ............................. 4,800 190,200
----------
387,638
----------
BROADCAST MEDIA -- 5.9%
Chancellor Media Corp. (a) ..................... 17,900 597,412
SFX Entertainment, Inc. (a) .................... 15,800 491,775
----------
1,089,187
----------
COMPUTER HARDWARE -- 3.3%
Powerhouse Technologies, Inc. (a) .............. 34,800 308,850
SBS Technologies, Inc. (a) ..................... 12,200 305,000
----------
613,850
----------
COMPUTER
SOFTWARE/SERVICES -- 17.6%
Citrix Systems, Inc. (a) ....................... 7,800 553,800
Compuware Corp. (a) ............................ 6,200 365,025
Ecsoft Group Plc (ADR) (a) ..................... 12,500 257,812
Point of Sale Ltd. (a) ......................... 51,400 244,150
RealNetworks, Inc. (a) ......................... 3,700 128,344
Wind River Systems, Inc. (a) ................... 16,500 779,625
Yahoo!, Inc. (a) ............................... 7,000 906,500
----------
3,235,256
----------
FINANCIAL(DIVERSE) -- 3.2%
HealthCare Financial Partners, Inc. (a) ........ 14,100 592,200
----------
FOOTWARE -- 2.9%
Kenneth Cole Productions, Inc. (a) ............. 29,200 523,775
----------
HOUSEHOLD FURNITURE &
APPLIANCES -- 3.0%
Winsloew Furniture, Inc. (a) ................... 28,600 543,400
----------
INVESTMENT BANK/BROKERAGE -- 3.6%
Donaldson Lufkin & Jenrette, Inc................ 11,900 304,194
Hambrecht & Quist Group, Inc. (a) .............. 18,900 347,287
----------
651,481
----------
MANAGED CARE -- 2.3%
Trigon Healthcare, Inc. (a) .................... 13,500 $ 418,500
----------
RESTAURANTS -- 4.9%
Arkansas Restaurants Corp. (a) ................. 41,000 425,375
Starbucks Corp. (a) ............................ 13,000 470,438
----------
895,813
----------
RETAIL-APPAREL -- 7.2%
Abercrombie & Fitch Co. Cl.A (a) ............... 12,600 554,400
Ann Taylor Stores Corp. (a) .................... 14,300 290,469
Cutter & Buck, Inc. (a) ........................ 20,400 469,200
----------
1,314,069
----------
RETAIL-DEPARTMENT STORES -- 1.2%
Family Dollar Stores, Inc. ..................... 13,400 211,050
----------
RETAIL-SPECIALTY -- 14.1%
Amazon.com, Inc. (a) ........................... 4,900 546,963
Bed Bath & Beyond, Inc. (a) .................... 25,900 605,412
eBay, Inc. (a) ................................. 500 22,531
Guitar Center Management, Inc. (a) ............. 25,900 485,625
Mens Wearhouse, Inc. (a) ....................... 8,100 139,725
Stage Stores, Inc. (a) ......................... 16,100 196,219
Tweeter Home Entertainment
Group, Inc. (a) ............................. 43,800 596,775
----------
2,593,250
----------
SERVICES-
ADVERTISING/MARKETING -- 10.1%
CMG Information Services, Inc. (a) ............. 12,100 644,325
Lamar Advertising Co. (a) ...................... 9,800 274,400
Outdoor Systems, Inc. (a) ...................... 22,600 440,700
Snyder Communications, Inc. (a) ................ 14,600 489,100
----------
1,848,525
----------
SERVICES-
COMMERCIAL & CONSUMER -- 6.3%
Bright Horizons Family
Solutions, Inc. (a) ........................ 11,900 252,875
Century Business Services, Inc. (a) .......... 21,500 438,062
Peapod, Inc. (a) ............................. 86,800 455,700
----------
1,146,637
----------
See Notes to Financial Statements
Annual Report 10
<PAGE>
- --------------------------------------------------------------------------------
KOBRICK CENDANT EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
September 30, 1998
Company Shares Value
- --------------------------------------------------------------------------------
SERVICES-COMPUTER SYSTEMS -- 2.7%
Keane, Inc. (a) .............................. 14,300 $ 502,288
-----------
TELECOMMUNICATIONS -
LONG DISTANCE -- 2.3%
Qwest Communications
International, Inc. (a) ................... 13,700 428,981
-----------
Total Common Stocks
(cost $16,302,752) ........................ 16,995,900
-----------
TOTAL INVESTMENTS -- 92.7%
(cost $16,302,752) ......................... 16,995,900
Other assets less liabilities -- 7.3% ........ 1,334,337
-----------
NET ASSETS -- 100% $18,330,237
===========
(a) Non-income producing security.
ADR - American Depositary Receipt
See Notes to Financial Statements
11 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
KOBRICK CENDANT GROWTH FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Performance
- -----------
We launched the Kobrick Cendant Growth Fund on September 1, 1998 and,
although it only had one month of operations prior to the end of the fiscal
year, we were pleased with the performance. As of September 30(th), the Growth
Fund's one month performance was +3.2%. This lagged the performance of the S&P
500 for the month (+6.24%), primarily due to our structuring the Fund's
portfolio at the beginning of the month and, accordingly, the Fund was not fully
invested at that time when the market was stronger.
Investment Review
- -----------------
The performance of the Fund in September was driven by a rebound in the
technology sector as well as investments across a broad set of industries
including telecommunication service companies, pharmaceuticals, and healthcare
services. Dell and Microsoft were the two biggest contributors to performance
and we believe both companies remain extremely well positioned within the
technology sector. Dell continues to take market share at an increasing rate.
Dell's business model of direct to consumer and business has afforded the
company a huge advantage and now other large computer companies including Compaq
and IBM have attempted to emulate the Dell model. Microsoft, despite near term
legal issues, continues to dominate the personal computer software market. More
importantly, it has quickly become a formidable competitor as the Internet
market continues to grow and its NT operating system continues to forge new
alliances at the enterprise level. The Fund also gained in September from its
investments in pharmaceutical companies, including Merck, Pfizer, and Warner
Lambert. Given the overall weakness in corporate profits, we noticed that these
companies have continued to deliver strong double-digit earnings growth.
Looking Ahead
- -------------
We believe that the recent decline in large company stock value was largely
due to the fear over earnings recession. However, over two-thirds of the U.S.
economy is based on consumer spending which has been and, we expect, will
continue to be strong. Accordingly, we will continue to perform our in-depth due
diligence to find stocks of large capitalization companies for the Growth Fund
that meet our strict buy disciplines -- management that can execute, high
earnings growth and compelling valuations.
Annual Report 12
<PAGE>
- --------------------------------------------------------------------------------
KOBRICK CENDANT GROWTH FUND
FUND PROFILE
- --------------------------------------------------------------------------------
Objective: Provide long-term growth of capital
Strategy: Invests in equity securities of companies with large
capitalizations, whose good track records, excellent
management and strong balance sheets indicate to the fund
manager an ability to grow and better handle market
volatility over time.
Inception Date: September 1, 1998
Manager: Frederick R. Kobrick
TOP TEN HOLDINGS
(as of September 30, 1998)
% of Fund's
net assets
Microsoft Corp. .................................................... 5.2
General Electric Co. ............................................... 4.5
AT&T Corp. ......................................................... 4.4
Dell Computer Corp. ................................................ 3.7
Merck & Co., Inc. .................................................. 3.7
Eastman Kodak Co. .................................................. 3.7
EMC Corp. .......................................................... 3.3
MCI Worldcom, Inc. ................................................. 3.2
Gap, Inc. .......................................................... 3.0
Home Depot, Inc. ................................................... 3.0
TOP FIVE INDUSTRIES
(as of September 30, 1998)
% of Fund's
net assets
Medical Products & Supplies ........................................ 18.3
Telecommunications-Long
Distance .......................................................... 16.3
Computer Software/Services ......................................... 7.1
Computer Hardware .................................................. 5.0
Diverse ............................................................ 4.5
The Value of a $10,000 Investment in the
Kobrick Cendant Growth Fund
From its Inception (9/1/98) to Present (9/30/98)
Compared to the Total Return for the S&P 500 Index
[LINE GRAPH APPEARS HERE]
Kobrick Cendant
S&P 500 Growth Fund
Inception Date 9/1/98 $10,000 $10,000
Present Date 9/30/98 $10,624 $10,320
Total Return +3.2%
(since inception 9/1/98 to 9/30/98)
Performance data quoted represents past performance and does not guarantee
future results and reflects a partial waiver of fees without which the total
return would have been lower. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The S&P 500 is an unmanaged index
of 500 publicly traded stocks representing a variety of industries. Index
performance includes reinvestment of dividends. Total return is not annualized.
13 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
KOBRICK CENDANT GROWTH FUND
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
September 30, 1998
Company Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 92.0%
BANKS-MONEY CENTER -- 1.6%
Chase Manhattan Corp. .......................... 400 $ 17,300
--------
BIOTECHNOLOGY -- 3.1%
Amgen, Inc. (a) ................................ 100 7,556
Biogen, Inc. (a) ............................... 200 13,162
Centocor, Inc. (a) ............................. 300 11,888
--------
32,606
--------
COMMUNICATION-EQUIPMENT -- 2.6%
Lucent Technologies, Inc. ...................... 400 27,625
--------
COMPUTER HARDWARE -- 5.0%
Dell Computer Corp. (a) ........................ 600 39,450
International Business Machines ................ 100 12,800
--------
52,250
--------
COMPUTER
SOFTWARE/SERVICES -- 7.1%
HBO & Co. ...................................... 700 20,213
Microsoft Corp. (a) ............................ 500 55,031
--------
75,244
--------
COMPUTERS-NETWORKING -- 2.6%
Cisco Systems, Inc. (a) ........................ 450 27,816
--------
COMPUTERS-PERIPHERAL -- 3.3%
EMC Corp. (a) .................................. 600 34,312
--------
DIVERSE -- 4.5%
General Electric Co. ........................... 600 47,737
--------
ELECTRONICS-SEMICONDUCTOR -- 2.4%
Intel Corp. .................................... 300 25,725
--------
FINANCIAL(DIVERSE) -- 3.3%
American Express Co. ........................... 200 15,525
Federal National Mortgage Assn.................. 300 19,275
--------
34,800
--------
HOSPITAL MANAGEMENT -- 1.1%
Tenet Healthcare Corp. (a) ..................... 400 $ 11,500
--------
INSURANCE-MULTILINE -- 1.8%
Chubb Corp. .................................... 300 18,900
--------
INVESTMENT BANK/BROKERAGE -- 2.6%
Merrill Lynch & Company, Inc.................... 400 18,950
Morgan Stanley Dean Witter & Co................. 200 8,613
--------
27,563
--------
MEDICAL PRODUCTS &
SUPPLIES -- 18.3%
Baxter International, Inc. ..................... 400 23,800
Cardinal Health, Inc. .......................... 200 20,650
Johnson & Johnson .............................. 400 31,300
Medtronic, Inc. ................................ 300 17,362
Merck & Co., Inc. .............................. 300 38,869
Pfizer, Inc. ................................... 100 10,594
Schering Plough Corp. .......................... 200 20,712
Warner - Lambert Co. ........................... 400 30,200
--------
193,487
--------
PHOTOGRAPH/IMAGING -- 3.7%
Eastman Kodak Co. .............................. 500 38,656
--------
RETAIL-APPAREL -- 3.0%
Gap, Inc. ...................................... 600 31,650
--------
RETAIL-BUILDING SUPPLIES -- 3.0%
Home Depot, Inc. ............................... 800 31,600
--------
RETAIL-FOOD CHAINS -- 2.1%
Albertson's, Inc. .............................. 400 21,650
--------
RETAIL-GENERAL MERCHANDISE -- 2.6%
Wal Mart Stores, Inc. .......................... 500 27,313
--------
RETAIL-SPECIALTY -- 2.0%
Staples, Inc. (a) .............................. 700 20,563
--------
See Notes to Financial Statements
Annual Report 14
<PAGE>
- --------------------------------------------------------------------------------
KOBRICK CENDANT GROWTH FUND
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
September 30, 1998
Company Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS -
LONG DISTANCE -- 16.3%
Ameritech Corp. ......................................... 400 $ 18,950
AT&T Corp. .............................................. 800 46,750
Bell Atlantic Corp. ..................................... 500 24,219
MCI Worldcom, Inc. (a) .................................. 700 34,212
Qwest Communications
International, Inc. (a) ............................... 800 25,050
SBC Communications, Inc ................................. 500 22,219
----------
171,400
----------
Total Common Stocks
(cost $924,262) ...................................... 969,697
----------
TOTAL INVESTMENTS -- 92.0%
(cost $924,262) ...................................... 969,697
Other assets less liabilities -- 8.0% ................... 84,742
----------
NET ASSETS -- 100% ...................................... $1,054,439
==========
(a) Non-income producing security.
See Notes to Financial Statements
15 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Kobrick-Cendant Investment Trust
Statements of Assets and Liabilities
September 30,1998
<TABLE>
<CAPTION>
Kobrick-Cendant Kobrick-Cendant Kobrick-Cendant
Capital Emerging Growth Growth
Fund Fund Fund
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments, at value (Note 2)
Securities (cost $22,432,855, $16,302,752
and $924,262, respectively) .............. $ 25,671,028 $ 16,995,900 $ 969,697
Cash ....................................... 621,444 -- 67,851
Receivable for securities sold ............. 1,223,576 1,398,245 12,938
Deferred organizational costs (Note 2) ..... 39,340 39,344 --
Deferred offering costs (Note 2) ........... 9,755 9,755 13,354
Dividends and interest receivable .......... 7,309 1,656 1,062
Receivable for Fund shares sold ............ 2,885 27,537 --
Prepaid expenses ........................... 2,427 2,425 --
Receivable due from Adviser (Note 3) ....... -- 2,368 8,506
------------ ------------ ------------
TOTAL ASSETS ........................... 27,577,764 18,477,230 1,073,408
LIABILITIES
Due to custodian ........................... -- 42,928 --
Payable for Fund shares redeemed ........... -- 4,533 --
Investment advisory fee payable (Note 3) ... 9,454 -- --
Distribution fees payable (Note 4) ......... 6,534 4,184 214
Accounts payable and accrued expenses ...... 99,070 95,348 18,755
------------ ------------ ------------
TOTAL LIABILITIES ...................... 115,058 146,993 18,969
------------ ------------ ------------
NET ASSETS .......................... $ 27,462,706 $ 18,330,237 $ 1,054,439
============ ============ ============
NET ASSETS
Paid-in capital ............................ $ 24,866,246 $ 19,126,196 $ 1,022,958
Undistributed net investment income ........ -- -- 273
Accumulated net realized loss on investments (641,713) (1,489,107) (14,227)
Net unrealized appreciation of investments . 3,238,173 693,148 45,435
------------ ------------ ------------
NET ASSETS .......................... $ 27,462,706 $ 18,330,237 $ 1,054,439
============ ============ ============
Total shares outstanding at end of period .. 2,563,524 1,807,244 102,189
Net asset value, offering price, and
redemption price per share ................. $ 10.71 $ 10.14 $ 10.32
============ ============ ============
</TABLE>
See Notes to Financial Statements
Annual Report 16
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Kobrick-Cendant Investment Trust
Statements of Operations
For the Periods Ended September 30, 1998
<TABLE>
<CAPTION>
Kobrick-Cendant Kobrick-Cendant Kobrick-Cendant
Capital Emerging Growth Growth
Fund (1) Fund (1) Fund (2)
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends (Net of foreign withholding taxes
of $741, $95, and $0, respectively) ............ $ 50,095 $ 48,614 $ 1,062
Interest ....................................... 42,164 92,772 410
----------- ----------- -----------
TOTAL INVESTMENT INCOME ................. 92,259 141,386 1,472
EXPENSES
Investment advisory fees (Note 3) .............. 250,782 239,480 856
Distribution fees (Note 4) ..................... 62,695 59,870 214
Transfer agent fees (Note 3) ................... 64,179 63,738 3,692
Custodian fees ................................. 32,682 28,862 1,675
Audit fees ..................................... 26,729 26,701 15,000
Legal fees ..................................... 26,630 26,519 74
Other .......................................... 26,559 26,600 407
Administrative fees ............................ 26,180 26,099 590
Registration fees .............................. 25,046 25,218 1,552
Amortization of offering costs (Note 2) ........ 17,379 17,379 --
Trustees fees (Note 3) ......................... 8,902 8,887 2,745
Amortization of organizational costs (Note 2) .. 8,444 8,440 --
----------- ----------- -----------
TOTAL EXPENSES .......................... 576,207 557,793 26,805
----------- ----------- -----------
Fees waived and/or expenses reimbursed
by investment advisor and transfer agent ....... (137,005) (137,945) (25,606)
----------- ----------- -----------
NET EXPENSES ............................ 439,202 419,848 1,199
----------- ----------- -----------
NET INVESTMENT INCOME (LOSS)........... $ (346,943) $ (278,462) $ 273
----------- ----------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments ............... (618,382) (1,489,107) (14,227)
Change in net unrealized appreciation
of investments ................................. 3,238,173 693,148 45,435
----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments ................................. 2,619,791 (795,959) 31,208
----------- ----------- -----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS ................................ $ 2,272,848 $(1,074,421) $ 31,481
=========== =========== ===========
</TABLE>
(1) For the period January 2, 1998 (commencement of investment operations)
through September 30, 1998.
(2) For the period September 1, 1998 (commencement of investment operations)
through September 30, 1998.
See Notes to Financial Statements
17 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Kobrick-Cendant Investment Trust
Statements of Changes in Net Assets
For the Periods Ended September 30,1998
<TABLE>
<CAPTION>
Kobrick-Cendant Kobrick-Cendant Kobrick-Cendant
Capital Emerging Growth Growth
Fund (1) Fund (1) Fund (2)
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations:
Net investment income (loss) ........ $ (346,943) $ (278,462) $ 273
Net realized loss on investments .... (618,382) (1,489,107) (14,227)
Change in net unrealized appreciation
of investments ................... 3,238,173 693,148 45,435
------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ........... 2,272,848 (1,074,421) 31,481
Net increase from Fund share
transactions (Note 6) ............ 25,089,858 19,304,658 1,022,958
------------ ------------ ------------
Net increase in net assets .......... 27,362,706 18,230,237 1,054,439
Net Assets
Beginning of period ................. 100,000 100,000 --
------------ ------------ ------------
End of period ....................... $ 27,462,706 $ 18,330,237 $ 1,054,439
============ ============ ============
Undistributed net investment income .... $ -- $ -- $ 273
============ ============ ============
</TABLE>
(1) For the period January 2, 1998 (commencement of investment operations)
through September 30, 1998.
(2) For the period September 1, 1998 (commencement of investment operations)
through September 30, 1998.
See Notes to Financial Statements
Annual Report 18
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Kobrick-Cendant Investment Trust
Financial Highlights
For a Share Outstanding Throughout the Period
For the Periods Ended September 30,1998
<TABLE>
<CAPTION>
Kobrick-Cendant Kobrick-Cendant Kobrick-Cendant
Capital Emerging Growth Growth
Fund (1) Fund (1) Fund (2)
------------ ------------ ------------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period .... $ 10.00 $ 10.00 $ 10.00
Income from Investment Operations:
Net investment income (loss) (3) (6) ... (0.127) (0.107) 0.003
Net Realized and Unrealized Gain
on Investments (7) ................... 0.837 0.247 0.317
----------- ----------- ----------
Total from Investment Operations ....... 0.710 0.140 0.320
----------- ----------- ----------
Net Asset Value at End of Period .......... $ 10.71 $ 10.14 $ 10.32
=========== =========== ==========
Total Return (4) .......................... 7.10% 1.40% 3.20%
Ratios & Supplemental Data
Net Assets at End of Period (000's) .... $ 27,463 $ 18,330 $ 1,054
Ratio of Operating Expenses to
Average Net Assets (3) (5) .......... 1.75% 1.75% 1.40%
Ratio of Net Investment Income (Loss) to
Average Net Assets (5) .............. (1.38)% (1.16)% 0.32%
Portfolio Turnover Rate (4) ............ 349.77% 286.87% 10.66%
</TABLE>
(1) For the period January 2, 1998 (commencement of investment operations)
through September 30, 1998.
(2) For the period September 1, 1998 (commencement of investment operations)
through September 30, 1998.
(3) Net investment income (loss) is after waiver/reimbursement of certain
expenses by Kobrick-Cendant Funds, Inc. and the Transfer Agent (See Note 3
to the Trust's financial statements.) Had the Investment Adviser and
Transfer Agent not undertaken to waive or reimburse expenses related to the
Fund, the Net Investment Loss per share and Ratio of Operating Expenses to
Average Net Assets would have been as follows for the Capital Fund, the
Emerging Growth Fund and the Growth Fund: ($0.189), ($0.230), ($0.248) and
2.21%, 2.24%, 11.11%, respectively.
(4) Not annualized.
(5) Annualized.
(6) Computed using the average shares method.
(7) Amount shown for a share outstanding for the Emerging Growth Fund does not
correspond with aggregate net gain (loss) on investments (per the Statement
of Operations) for 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
19 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Kobrick-Cendant Investment Trust
Notes to Financial Statements
September 30, 1998
NOTE 1 -- ORGANIZATION
The Kobrick-Cendant Investment Trust (the "Trust") was organized as a
Massachusetts business trust on October 10, 1997, and is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end management
investment company. The Trust consists presently of three separate Funds:
Kobrick-Cendant Capital Fund (commenced operations January 2, 1998),
Kobrick-Cendant Emerging Growth Fund (commenced operations January 2, 1998) and
Kobrick-Cendant Growth Fund (commenced operations September 1, 1998)
(individually, a "Fund", collectively, the "Funds"). The investment objective of
the Kobrick-Cendant Capital Fund is to seek maximum capital appreciation. In
seeking to achieve its investment objective, the Kobrick-Cendant Capital Fund
invests primarily in equity securities of companies with small, medium and large
capitalizations, including those considered by the Fund's investment manager to
be undervalued special situations and emerging growth companies. The investment
objective of the Kobrick-Cendant Emerging Growth Fund is to provide growth in
capital. In seeking to achieve its investment objective, the Kobrick-Cendant
Emerging Growth Fund invests primarily in equity securities of emerging growth
and small capitalization companies. The investment objective of the
Kobrick-Cendant Growth Fund is to provide long-term growth of capital. In
seeking to achieve its investment objective, the Kobrick-Cendant Growth Fund
invests primarily in equity securities of companies with large capitalizations
believed by the Fund's investment manager to have better than average growth
potential over the years.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements.
SECURITY VALUATION: Each Fund's investment securities which are traded on stock
exchanges or are quoted by the National Association of Security Dealers
Automated Quotation System ("NASDAQ") are valued at the last reported sale
prices as of the close of the regular session of trading on the New York Stock
Exchange ("NYSE") on the day the securities are valued, or if not traded on a
particular day, at the closing bid prices. Securities traded in the
over-the-counter market, and which are not quoted by NASDAQ, are valued at the
last sale prices (or, if the last sale prices are not readily available, at the
last bid prices as quoted by the brokers that make markets in the securities) as
of the close of the regular session of trading on the NYSE on the day the
securities are being valued. Securities which are traded both in the
over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market. Short-term investments with
maturities less than 60 days are valued at amortized cost which approximates
market value. Securities for which current market quotations are not readily
available are valued at their fair value as determined in good faith in
accordance with procedures approved by the Board of Trustees.
REPURCHASE AGREEMENTS: Each Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser Kobrick-Cendant Funds, Inc.
("Kobrick-Cendant"), has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. The repurchase
Annual Report 20
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Kobrick-Cendant Investment Trust
Notes to Financial Statements (continued)
September 30, 1998
agreements are collateralized by U.S. Government securities. The Fund's
custodian takes possession of the underlying securities. It is the policy of the
Funds to value the underlying collateral daily on a mark-to-market basis to
determine that the value of the collateral held, including accrued interest, is
at least equal to 102% of the repurchase price. In the event of default of the
obligation to repurchase, the Funds have the right to liquidate the collateral
and apply the proceeds in satisfaction of the obligation.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Investment security transactions
are recorded on a trade date basis. Realized gains and losses on investments
sold are recorded based on the specific identification method. Dividend income
on investment securities, less foreign taxes withheld, if any, is recorded on
the ex-dividend date. Interest income on investment securities is recorded on
the accrual basis.
EXPENSES: Certain of the Trust's expenses are allocated equally to those Funds
which make up the Trust. Other expenses of the Trust are allocated to the
respective Funds based upon the relative net assets of each Fund. Operating
expenses directly attributable to a Fund are charged to the Fund's operations.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of each Fund to
declare and pay dividends from net investment income at least annually. Each
Fund will distribute net realized capital gains (including net short-term
capital gains) unless offset by any available capital loss carryforward, at
least annually. Income distributions and capital gain distributions are
determined in accordance with federal 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 the Funds, timing differences and differing characterizations
of distributions made by the Funds.
FEDERAL INCOME TAXES: Each Fund intends to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), by complying with the provisions available to regulated investment
companies, as defined in applicable sections of the Code, and to make
distributions of taxable income to shareholders sufficient to relieve each Fund
from all or substantially all federal income taxes. Accordingly, no provision
for federal income tax has been made. The Funds elected to defer to their fiscal
year ending September 30, 1999, losses of $23,331, $1,290,191 and $13,133 on
Kobrick-Cendant Capital Fund, Kobrick-Cendant Emerging Growth Fund and
Kobrick-Cendant Growth Fund, respectively.
OFFERING AND ORGANIZATION COSTS: Offering costs, including the fees and expenses
of registering and qualifying shares of each Fund for distribution under Federal
and state securities regulations, are being amortized over the one-year period
from the date each Fund commenced its operations. Costs and expenses of the
Trust in connection with the organization of the Trust and the initial offering
of shares of each Fund, excluding the Kobrick-Cendant Growth Fund, have been
deferred by the Trust and are being amortized on a straight-line basis from the
date operations commenced over a period that a benefit is expected will be
realized, not to exceed sixty months.
21 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Kobrick-Cendant Investment Trust
Notes to Financial Statements (continued)
September 30, 1998
If any of the initial shares of the Kobrick-Cendant Capital Fund and
Kobrick-Cendant Emerging Growth Fund are redeemed during the amortization period
of these organizational costs by any holder thereof, the redemption proceeds
will be reduced by a pro rata portion of the unamortized organization costs.
Organizational costs associated with the Kobrick-Cendant Growth Fund have been
borne by Kobrick-Cendant.
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.
LINE OF CREDIT: The Trust has entered into a committed line of credit with a
bank. This line of credit agreement includes restrictions that the Trust
maintain an asset coverage ratio of at least 300% and borrowings must not exceed
prospectus limitations. For the period ended September 30, 1998, the Trust had
no borrowings against the line of credit.
NOTE 3 -- INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement (the "Advisory
Agreement") with Kobrick-Cendant. Under the agreement, Kobrick-Cendant provides
investment management services to the Trust, and is entitled to receive a fee,
computed daily and paid monthly, at the annual rate of 1.00% based on average
daily net assets of each Fund.
Cendant Corporation has an interest in non-voting preferred stock of
Kobrick-Cendant and warrants which, if exercised, could result in Cendant
Corporation owning a majority of the total common stock in Kobrick-Cendant. For
the period ended September 30, 1998, Cendant Corporation owned 70%, 81%, and 98%
of the Kobrick-Cendant Capital Fund, Kobrick-Cendant Emerging Growth Fund, and
Kobrick-Cendant Growth Fund, respectively. Investment activities of this
shareholder could have a material impact on the Funds.
Kobrick-Cendant may, from time to time, voluntarily waive its fees or
reimburse expenses charged to each Fund. Pursuant to the transfer agent
agreement, Boston Financial Data Services, Inc. ("BFDS") has agreed to waive a
portion of their fees for the first six months of each Fund's operations. For
the period ended September 30, 1998, Kobrick-Cendant and BFDS waived fees and/or
reimbursed expenses as follows:
<TABLE>
<CAPTION>
Kobrick-Cendant Kobrick-Cendant Kobrick-Cendant
Capital Emerging Growth Growth
Fund Fund Fund
----------- ----------- ----------
<S> <C> <C> <C>
Expenses Reimbursed by the
Investment Adviser ................... $ 12,022 $ 14,955 $ 23,056
Investment Advisory Fees Waived ...... 114,231 112,238 856
Transfer Agent Fees Waived .............. 10,752 10,752 1,694
----------- ----------- ----------
Total Fees Waived and/or Reimbursed ..... $ 137,005 $ 137,945 $ 25,606
=========== =========== ==========
</TABLE>
Annual Report 22
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Kobrick-Cendant Investment Trust
Notes to Financial Statements (continued)
September 30, 1998
No officer, director or employee of Kobrick-Cendant, or any affiliate
thereof, receives any compensation from the Trust for serving as trustee or
officer of the Trust. Each Trustee who is not an "affiliated person" receives an
annual fee from the Trust of $4,000 plus $500 from each Fund for each board
meeting attended and $500 from each Fund for each audit committee meeting
attended. The Trust also reimburses out-of-pocket expenses incurred by each
Trustee for attending such meetings.
NOTE 4 -- DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Trust
has adopted a plan of distribution (the "Plan") under which each Fund may
directly incur certain distribution-related expenses, including: payments to
securities dealers and others who are engaged in the sale of shares of each Fund
and who may be advising shareholders of each Fund regarding the purchase, sale
or retention of such shares; expenses of maintaining personnel who engage in or
support distribution of shares or who render shareholder support services not
otherwise provided by the Trust's transfer agent; expenses of formulating and
implementing marketing and promotional activities; expenses of preparing,
printing and distributing sales literature, prospectuses, statements of
additional information and reports for recipients other than existing
shareholders of each Fund; expenses of obtaining such information, analyses and
reports with respect to marketing and promotional activities as the Trust may,
from time to time, deem advisable, and any other expenses related to the
distribution of the Funds' shares. The annual limitation for expenses pursuant
to the plan is .25% of each Fund's average daily net assets.
NOTE 5 -- PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate amounts of purchases and sales of investment securities,
excluding short-term investments, for the period ended September 30, 1998, were
as follows:
Purchases Sales
---------------- ----------------
Kobrick-Cendant Capital Fund.......... $ 142,717,405 $ 119,666,168
Kobrick-Cendant Emerging Growth Fund.. 106,991,872 89,200,013
Kobrick-Cendant Growth Fund........... 1,041,879 103,390
At September 30, 1998, the identified cost of investments for federal
income tax purposes owned by each Fund and their respective gross unrealized
appreciation and unrealized depreciation were as follows:
<TABLE>
<CAPTION>
Gross Gross Net
Identified Unrealized Unrealized Unrealized
Cost Appreciation Depreciation Appreciation
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Kobrick-Cendant Capital Fund $ 23,074,568 $ 3,882,602 $ 1,286,142 $ 2,596,460
Kobrick-Cendant Emerging Growth Fund 16,501,669 1,744,272 1,250,041 494,231
Kobrick-Cendant Growth Fund 925,356 65,072 20,731 44,341
</TABLE>
23 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Kobrick-Cendant Investment Trust
Notes to Financial Statements (continued)
September 30, 1998
NOTE 6 - SCHEDULE OF CAPITAL STOCK ACTIVITY
As of September 30, 1998, an unlimited number of shares of beneficial
interest, having no par value, were authorized for the Trust. The capital stock
activity for the periods ended are as follows:
Nine Months Ended
September 30, 1998
Kobrick-Cendant Capital Fund: Shares Amount
---------- -----------
Shares Sold 3,848,564 $39,227,006
Shares Redeemed (1,295,040) (14,137,148)
---------- -----------
Net Increase 2,553,524 $25,089,858
========== ===========
Nine Months Ended
September 30, 1998
Kobrick-Cendant Emerging Growth Fund: Shares Amount
---------- -----------
Shares Sold 3,395,365 $35,267,792
Shares Redeemed (1,598,121) (15,963,134)
---------- -----------
Net Increase 1,797,244 $19,304,658
========== ===========
One Month Ended
September 30, 1998
Kobrick-Cendant Growth Fund: Shares Amount
---------- -----------
Shares Sold 102,195 $ 1,023,020
Shares Redeemed (6) (62)
---------- -----------
Net Increase 102,189 $ 1,022,958
========== ===========
Annual Report 24
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Kobrick-Cendant Investment Trust and Shareholders of:
Kobrick-Cendant Capital Fund
Kobrick-Cendant Emerging Growth Fund
Kobrick-Cendant Growth Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedules 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 Kobrick-Cendant Capital Fund,
Kobrick-Cendant Emerging Growth Fund and Kobrick-Cendant Growth Fund
(constituting Kobrick-Cendant Investment Trust, hereafter referred to as the
"Trust") at September 30, 1998, and the results of their operations, the changes
in their 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 Trust'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 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
September 30, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 11, 1998
- --------------------------------------------------------------------------------
The Kobrick-Cendant Investment Trust's former accountants, Ernst & Young LLP,
resigned and have been replaced by PricewaterhouseCoopers LLP on approval by the
Board of Trustees. There were no disagreements with the former accountants on
any matters.
25 Annual Report
<PAGE>
[LOGO OF KOBRICK CENDANT FUNDS APPEARS HERE]
Kobrick Cendant Capital Fund
Kobrick Cendant Emerging Growth Fund
Kobrick Cendant Growth Fund
Annual Report
September 30, 1998
