UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07813
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KOBREN INSIGHT FUNDS
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(Exact name of registrant as specified in charter)
20 William Street, Suite 310
WELLESLEY HILLS, MA 02481
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(Address of principal executive offices) (Zip code)
Eric J. Godes
Kobren Insight Funds
20 William Street, Suite 310
WELLESLEY HILLS, MA 02481
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(Name and address of agent for service)
registrant's telephone number, including area code: 800-456-2736
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Date of fiscal year end: DECEMBER 31
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Date of reporting period: DECEMBER 31, 2005
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
KOBREN INSIGHT MANAGEMENT, INC.
KOBREN
[GRAPHIC OMITTED]
INSIGHT
FUNDS
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ANNUAL REPORT DECEMBER 31, 2005
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MESSAGE TO SHAREHOLDERS
IN 2006, BALANCING OPTIMISM
AND PESSIMISM WILL BE KEY
"Bears don't live on Park Avenue."
This bit of investment wisdom was handed down to us by Bernard Baruch -- a
long-forgotten Wall Street financier, statesman and advisor to presidents. I've
always held a special place in my heart for Baruch because of our shared love of
investing and alma mater. (I attended Bernard Baruch College, City University of
New York, before getting my M.B.A. at Columbia University.)
If you think about it, the investment lesson taught by Baruch's simple
observation speaks volumes about how optimistic investors (those willing to risk
their capital in, say, stock funds) are more likely to build wealth over time
relative to those who stash their cash under a mattress.
[GRAPHIC OMITTED]
[PIC]
ERIC M. KOBREN
This is still an important and relevant message, so I hesitate to provide a
litany of my worries for 2006, as I'm concerned that some may overreact to the
potholes that I'm obliged to identify. Frankly, much of what we see is
worrisome; but this shouldn't have you running for cover.
A SPLASH OF COLD WATER
My first concern is that I don't believe the inflation dragon has yet been
slain. I expect that the long-term demand for commodities remains "up," as
global economic growth creates supply/demand imbalances. This could keep the
Federal Reserve Board (the "Fed") in "rate-hike" mode longer into 2006 than most
think.
Even if the Fed doesn't hike rates much higher in 2006, the 13 hikes they
have already instituted put the housing market at risk. Strong housing prices
have been critical to the U.S. economy because of their "wealth effect." Home
equity loans have been a major source of cheap capital for car purchases,
shopping binges, vacations and college educations. In fact, the number of
mortgages in default or foreclosure rose 18.6% from September 2005 to October
2005. This may be a sign that rising interest rates (especially for those with
adjustable-rate mortgages), coupled with escalating utility costs, are beginning
to pinch.
Turning to corporate profits, 2005 will likely come in strong, with
earnings growth for the Standard & Poor's 500 Index ("S&P 500") up 16% over
2004. Of course, stock investors have already accounted for these profits, so
the real question is what happens in 2006? I believe that the rate of earnings
growth has already peaked, and will slow to a more moderate rate. At the same
time, the price the market is putting on those earnings remains elevated by
historical standards. At the end of November, the S&P 500's P/E was 18.7 versus
an average of 17.4 over the last 50 years. So while U.S. stocks may not be
extremely expensive, they're no bargain, either.
THE RIGHT ASSET ALLOCATION
However, much as our positioning helped Kobren Growth nicely outpace the
S&P 500's return in 2005, the right mix of funds can help address some of these
concerns.
That means a continued focus on international stocks. In 2005, foreign
stock funds (in general) delivered better returns than U.S. stock funds --
despite a 12% gain in the dollar which reduced those returns. Heading into 2006,
valuations in many foreign markets are still cheaper than ours, and I expect the
dollar to fall, rather than rise, this year, thereby boosting foreign stock fund
returns. We also have a small amount of emerging market exposure. This area of
the market remains one of the most attractively valued, but also one of the most
volatile. In addition, we also have some exposure to commodities through a
unique bond fund, Pimco Commodity RealReturn Strategy Fund.
On the domestic equity front, we are shifting our focus even more toward
large-cap stocks, a process we began last year. Currently, large-caps are more
attractively priced than small-caps and we believe they will stand up better in
a slowing economic environment. While we believe small-caps still represent
solid investment opportunities for fund managers with better stock-selection
skills, there's a stronger case for large-caps, especially the "mega-caps." By
one measure, they're trading at a 20-year low relative to the S&P 500, while
their dividend yield is at a 20-year high.
Of course, cash is always a safe harbor, and we will use it if necessary to
protect your capital. But before considering that move, we remain mindful of
Baruch's admonishment about market-bears. After all, even if we don't want to
live on Park Avenue, wouldn't it be nice to have that option?
Sincerely,
/S/ ERIC M. KOBREN
Eric M. Kobren
President and Portfolio Manager
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KOBREN GROWTH FUND 12/31/05
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VALUE OF $10,000 INVESTED 12/16/96
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Kobren Growth $19,445
S&P 500 Index $19,931
12 MONTHS 5 YEAR ANNUALIZED
ENDED ANNUALIZED SINCE INCEPTION
TOTAL RETURN (%) 12/31/05 RETURN (12/16/96)
- --------------- -------- ------ ----------
Kobren Growth +8.2% +4.8% +7.6%
S&P 500 Index +4.9% +0.5% +7.9%
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ASSET ALLOCATION*
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[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Cash & Net Other Assets and Liab. 0.7%
U.S. Stocks 78.3%
International 21.0%
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STYLE ALLOCATION*
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Large Cap Growth 41.1%
International 21.0%
Large Cap Value 19.2%
Small Cap Value 8.3%
Sector 4.5%
Specialty 5.2%
Cash & Net Other Assets and Liab. 0.7%
* BASED ON TOTAL NET ASSETS.
KOBREN GROWTH FUND (Ticker: KOGRX): In an environment of strong economic and
corporate earnings growth, against a backdrop of low interest rates, the U.S.
stock market finished higher for the third year in a row in 2005. Though stock
market gains were generally lower than long-term averages, there were pockets of
the market that did quite well, including natural resources. Also notable is
that international securities outperformed the U.S. market despite a rising U.S.
dollar.
While we can always improve, we were generally pleased with our performance
last year relative to the market and peers on a total return and risk-adjusted
basis. We have now bettered the S&P 500 in 4 of the last 5 calendar years. What
we are perhaps proudest of is accomplishing this feat with lower volatility (20%
less than the S&P 500 over the last 6 months).
All positions gained ground over the last 6 months of the year, lead by the
international funds SSGA EMERGING MARKETS, JULIUS BAER INTERNATIONAL EQUITY, and
THIRD AVENUE INTERNATIONAL VALUE. Another strong performer over this time
period, though it lost ground in the 4th quarter of 2005, was PIMCO COMMODITY
REALRETURN STRATEGY. Among domestic equity exposures, large-cap growth stocks
lead the way, which includes T.ROWE PRICE BLUE CHIP GROWTH, FIDELITY BLUE CHIP
GROWTH, and FIDELITY CAPITAL APPRECIATION. As always, we will continue to
monitor all positions closely and make adjustments as necessary. o
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TOP TEN HOLDINGS*
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KOBREN GROWTH STYLE ALLOC (%)
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T. Rowe Price Blue Chip Growth Large Cap Growth 16.7
Oakmark Select - Class I Large Cap Value 12.7
Fidelity Capital Appreciation Large Cap Growth 12.6
Fidelity Blue Chip Growth Large Cap Growth 11.8
Julius Baer Int'l Equity - Class I International 11.0
Longleaf Partners Small Cap Small Cap Value 8.3
Longleaf Partners Large Cap Value 6.5
SSgA Emerging Markets International 5.4
PIMCO Comm. RR Strategy - Class I Specialty 5.2
Third Avenue Int'l Value International 4.6
TOTAL FUND NET ASSETS $66,605,464
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TOP SECTORS*
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(TOTALS MAY NOT EQUAL 100%)
Financial Services 16.8
Healthcare 14.8
Consumer Services 10.9
Hardware 9.4
Industrial Materials 8.7
Media 8.6
Consumer Goods 8.6
Business Services 7.8
Energy 7.6
Software 3.3
Telecom 3.1
Utilities 0.5
* EQUITIES ONLY
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Kobren Insight Management, Inc. is the adviser for Kobren Insight Funds, and
E*TRADE Securities LLC, is the distributor for the Funds. PERFORMANCE DATA
REFLECTS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS.
PERFORMANCE DATA DOES NOT REFLECT TAXESTHAT A SHAREHOLDER WOULD PAY ON
DISTRIBUTIONS OR THE REDEMPTION OF SHARES AND WOULD HAVE BEEN LOWER IN THE
ABSENCE OF FEEWAIVERS AND EXPENSE REIMBURSEMENTS. RETURN FIGURES INCLUDE
REINVESTMENT OF DISTRIBUTIONS. INVESTMENT RETURN AND PRINCIPALVALUE WILL
FLUCTUATE WITH MARKET CONDITIONS AND SHARES WHEN REDEEMED MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. The S&P 500 Index is an unmanaged index of
common stocks and not subject to fees and expenses.
2 KOBREN INSIGHT FUNDS -- 2005 ANNUAL REPORT
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PORTFOLIO OF INVESTMENTS
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DECEMBER 31, 2005
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SHARES MUTUAL FUNDS - 100.14% VALUE (NOTE 1)
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LARGE CAP GROWTH - 41.07%
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181,693 Fidelity Blue Chip Growth Fund $ 7,841,876
333,773 Fidelity Capital Appreciation Fund 8,377,715
340,869 T. Rowe Price Blue Chip Growth Fund 11,139,591
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27,359,182
INTERNATIONAL - 20.99%
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202,445 Julius Baer Int'l Equity Fund - Class 7,308,280
192,460 I SSgA Emerging Markets Fund Third 3,612,470
144,606 Avenue Int'l Value Fund 3,059,860
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13,980,610
LARGE CAP VALUE - 19.21%
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139,448 Longleaf Partners Fund
257,636 Oakmark Select Fund - Class I 4,318,708
8,476,234
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12,794,942
SMALL CAP VALUE - 8.31%
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204,843 Longleaf Partners Small Cap Fund 5,534,845
SPECIALTY - 5.22%
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PIMCO Commodity RealReturn
234,011 Strategy Fund - Class I 3,477,398
SECTOR - 4.53%
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22,164 Fidelity Select Health Care Portfolio 3,016,959
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SHARES VALUE (NOTE 1)
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MONEY MARKET - 0.81%
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537,543 Dreyfus Cash Mgmt Plus Fund (1) $ 537,543
TOTAL MUTUAL FUNDS
(COST $54,199,601) 66,701,479
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TOTAL INVESTMENTS 100.14% 66,701,479
(Cost $54,199,601)*
LIABILITIES NET OF CASH
AND OTHER ASSETS -0.14% (96,015)
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TOTAL NET ASSETS 100.00% $ 66,605,464
=============
(1) An affiliate of the Custodian.
* For Federal income tax purposes, cost is $54,267,617 and appreciation
(depreciation) is as follows:
Unrealized appreciation: $ 13,260,847
Unrealized depreciation: (826,985)
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Net unrealized appreciation: $ 12,433,862
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STATEMENT OF ASSETS AND LIABILITIES
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DECEMBER 31, 2005
ASSETS:
Investments, at cost $ 54,199,601
===============
Investments, at value (Note 1) (See Portfolio of Investments) $ 66,701,479
Dividends receivable 3,341
Receivable for fund shares sold 39,670
Prepaid expenses and other assets 4,014
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Total assets 66,748,504
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LIABILITIES:
Payable for dividend distribution 30,394
Payable for fund shares redeemed 31,643
Investment advisory fee payable (Note 2) 38,764
Accrued Trustees' fees and expenses (Note 2) 3,191
Audit fees payable 18,000
Accrued expenses and other payables 21,048
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Total liabilities 143,040
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NET ASSETS: $ 66,605,464
===============
NET ASSETS CONSIST OF:
Accumulated undistributed net investment income $ 264,247
Accumulated net realized gain on investments 3,110,117
Net unrealized appreciation of investments 12,501,878
Par value (Note 5) 4,620
Paid-in capital 50,724,602
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NET ASSETS $ 66,605,464
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SHARES OUTSTANDING (unlimited authorization) 4,619,604
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Net asset value, offering and redemption price per share
(Net Assets/Shares Outstanding) $ 14.42
===============
SEE NOTES TO FINANCIAL STATEMENTS
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INTERNATIONAL INVESTING HAS SPECIAL RISKS, INCLUDING CURRENCY FLUCTUATION,
POLITICAL AND ECONOMIC INSTABILITY, AND THEVOLATILITY OF EMERGING MARKETS. The
Adviser absorbs certain expenses of each Kobren Insight Fund, without which
total returns would have been lower. Portfolio holdings are also subject to
change. Data sources: Kobren Insight Management, Inc. and Morningstar. THIS
REPORT MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS. PLEASE READ IT CAREFULLY
BEFORE INVESTING. YOU MAY OBTAIN A PROSPECTUS OR CURRENT PERFORMANCE INFORMATION
BY CALLING 1-800-4KOBREN (1-800-456-2736) OR BY VISITING WWW.KOBREN.COM.
Copyright (C)2006
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KOBREN INSIGHT FUNDS - 2005 ANNUAL REPORT 3
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STATEMENT OF OPERATIONS
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FOR THE YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME:
Dividends $ 1,205,400
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Total investment income 1,205,400
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EXPENSES:
Investment advisory fee (Note 2) 472,320
Administration fee (Note 2) 83,299
Transfer agent fees (Note 2) 46,923
Sub-transfer agent fees (Note 3) 16,767
Custodian fees (Note 2) 3,000
Professional fees 32,889
Trustees' fees and expenses (Note 2) 15,950
Registration and filing fees 20,500
Reports to shareholders 5,114
Other 6,454
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Total expenses 703,216
Expenses waived by investment adviser (Note 2) (73,430)
Other reductions (Note 2) (12,188)
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Net expenses 617,598
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NET INVESTMENT INCOME 587,802
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from security transactions 1,559,506
Short-term capital gain distributions received 175,413
Long-term capital gain distributions received 2,938,384
Net change in unrealized depreciation of investments (90,422)
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Net realized and unrealized gain on investments 4,582,881
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NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 5,170,683
=============
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STATEMENTS OF CHANGES IN NET ASSETS
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YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
-------------------- ---------------------
Net investment income $ 587,802 $ 344,210
Net realized gain from security transactions 1,559,506 2,670,193
Short-term capital gain distributions received 175,413 111,433
Long-term capital gain distributions received 2,938,384 823,619
Net change in unrealized appreciation (depreciation) of investments (90,422) 1,857,615
----------------- -----------------
Net increase in net assets resulting from operations 5,170,683 5,807,070
----------------- -----------------
Distribution to shareholders from:
Net investment income (761,605) (293,054)
Net realized gains on investments (2,543,765) --
----------------- -----------------
Total distributions (3,305,370) (293,054)
----------------- -----------------
Net increase (decrease) in net assets from fund
share transactions (Note 5) 7,897,491 (3,319,183)
----------------- -----------------
Net increase in net assets 9,762,804 2,194,833
NET ASSETS:
Beginning of period 56,842,660 54,647,827
----------------- -----------------
End of period (including line A) $ 66,605,464 $ 56,842,660
================= =================
(A) Accumulated undistributed net investment income $ 264,247 $ 262,637
================= =================
SEE NOTES TO FINANCIAL STATEMENTS
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4 KOBREN INSIGHT FUNDS - 2005 ANNUAL REPORT
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FINANCIAL HIGHLIGHTS
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FOR A FUND SHARE OUTSTANDING THROUGHOUT THE YEAR.
FOR THE YEAR ENDED
12/31/2005 12/31/2004 12/31/2003 12/31/2002 12/31/2001
---------- ---------- ---------- ---------- ----------
Net asset value - beginning of period $ 14.02 $ 12.69 $ 10.01 $ 11.37 $ 12.32
Net investment income (loss) (a)(b) 0.12 0.08 0.12 0.07 (0.04)
Short-term capital gains distributions received 0.04 0.03 0.02 0.01 0.01
Net realized and unrealized gain (loss) on 0.99 1.29 2.66 (1.36) (0.87)
----------- ----------- ----------- ----------- -----------
investments
Net increase (decrease) in net assets resulting
from investment operations 1.15 1.40 2.80 (1.28) (0.90)
Distributions from net investment income (0.17) (0.07) (0.12) (0.07) --
Distributions from net realized short-term
capital gain distributions received -- -- -- (0.01) --
Distributions from net realized capital gains
on investments (0.58) -- -- -- (0.05)
----------- ----------- ----------- ----------- -----------
Total distributions (0.75) (0.07) (0.12) (0.08) (0.05)
Net asset value - end of period $ 14.42 $ 14.02 $ 12.69 $ 10.01 $ 11.37
=========== =========== =========== =========== ===========
Total return (c) 8.22% 11.05% 27.96% (11.26)% (7.28)%
=========== =========== =========== =========== ===========
RATIOS TOAVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 66,605 $ 56,843 $ 54,648 $ 46,491 $ 55,335
Ratio of net investment income (loss)
to average net assets (b) 0.93% 0.63% 1.06% 0.61% (0.32)%
Ratio of operating expenses to average
net assets before fees waived and/or
expenses reimbursed by investment
adviser and other reductions (d) 1.12% 1.16% 1.18% 1.21% 1.08%
Ratio of operating expenses to average
net assets after reimbursements and
reductions (d) 0.98% 0.98% 0.96% 0.96% 0.96%
Portfolio turnover rate 29% 30% 81% 143% 80%
<FN>
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(a) Recognition of net investment income (loss) by the Fund is affected by the
timing of the declaration of dividends by the underlying investment
companies in which the Fund invests.
(b) Net investment income (loss) would have been lower (greater) in the absence
of fee waivers and expense reimbursements.
(c) Total return represents aggregate total return for the period indicated and
would have been lower in the absence of fee waivers and expense
reimbursements and assumes reinvestment of all distributions.
(d) Does not include expenses of the investment companies in which the Fund
invests.
</FN>
SEE NOTES TO FINANCIAL STATEMENTS
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KOBREN INSIGHT FUNDS -- 2005 ANNUAL REPORT 5
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NOTES TO FINANCIAL STATEMENTS
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DECEMBER 31, 2005
1. ORGANIZATION AND 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, 2005, the Trust offered shares of two funds, Kobren
Growth Fund and Delphi Value Fund. Information presented in these financial
statements pertains only to Kobren Growth Fund (the "Fund"). The Fund seeks to
achieve its investment objective by investing primarily in shares of other
investment companies ("underlying funds"), but also may invest directly in
securities that are suitable investments for the Fund. The following is a
summary of significant accounting policies followed by the Fund in the
preparation of its financial statements.
USE OF ESTIMATES -- The preparation of financial statements in accordance with
U.S. 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.
PORTFOLIO VALUATION -- The underlying funds are valued according to their stated
net asset value. The Fund's other investment securities are valued at the last
sale price on the securities exchange or national securities market on which
such securities primarily are traded or for NASDAQ traded securities, the NASDAQ
Official Closing Price. 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 carried at amortized
cost, which approximates 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 gain (including net short-term capital gain), if any, annually,
unless offset by anyavailable capital loss carryforward. Additional
distributions of net investment income and capital gain 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 gain
on various investment securities held by the Fund. The tax character of
distributions paid during 2005 and 2004 was as follows:
DISTRIBUTIONS PAID IN 2005 DISTRIBUTIONS PAID IN 2004
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME* CAPITAL GAINS INCOME CAPITAL GAINS
------- ------------- ------ -------------
Kobren Growth Fund $ 773,683 $ 2,531,687 $ 293,054 $ --
As of December 31, 2005, the components of distributable earnings on a tax basis
were as follows:
CAPITAL LOSS UNDISTRIBUTED UNDISTRIBUTED UNREALIZED
CARRYFORWARD ORDINARY INCOME* LONG-TERM GAIN APPRECIATION
------------ ---------------- -------------- ------------
Kobren Growth Fund $ -- $ 509,293 $ 2,963,481 $ 12,433,862
*For tax purposes, short-term capital gain distributions are considered ordinary
income.
Net investment income and realized gain and loss for federal income tax purposes
may differ from that reported in the financialstatements because of permanent
book and tax basis differences. Permanent book and tax differences of
$175,413and $(175,413) were reclassified at December 31, 2005 among accumulated
undistributed net investment income and accumulated net realized gain on
investments sold, respectively, for the Fund. This reclass is related to
short-term capital gain dividends reclassed to ordinary income. The difference
between book and tax-basis unrealized appreciation is attributable to the tax
deferral of losses on wash sales.
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. All discounts/premiums are accreted/amortized using the effective
yield method.
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 of 1986, as amended, applicable to regulated investment companies, by
distributing substantially all of its earnings to its shareholders. Therefore,
no federal income or excise tax provision is applicable.
EXPENSES -- Expenses of the Trust which are directly identifiable to a specific
fund are allocated to that fund. Other expenses of the Trust are allocated
between the funds based upon relative net assets of each fund. Other expenses of
the Trust are allocated equally to those funds in the Trust.
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6 KOBREN INSIGHT FUNDS - 2005 ANNUAL REPORT
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
COMMITMENTS AND CONTINGENCIES -- In the normal course of business, the Trust
enters into contracts on behalf of the Fund that contain a variety of provisions
for general indemnifications. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that are not known at this time. However, based on experience,
the Fund believes the risk of loss is remote.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE, DISTRIBUTION AND SHAREHOLDER
SERVICING FEES AND OTHER RELATED PARTY TRANSACTIONS:
The Trust has entered into an investment advisory agreement with Kobren Insight
Management, Inc. ("KIM"), which was acquired by E*TRADE FINANCIAL Corporation
("E*TRADE FINANCIAL") on November 2, 2005. The Fund pays KIM a fee, computed
daily and paid monthly, at the annual rate of 0.75% of the Fund's average daily
net assets. KIM has voluntarily agreed to limit the Fund's other operating
expenses, before other reductions, to 0.25% of the Fund's average daily net
assets. This voluntary agreement may be terminated at the discretion of the
Adviser.
As of November 2, 2005, E*TRADE Securities LLC ("E*TRADE Securities"), an
affiliate of KIM, serves as distributor of the Fund's shares and bears all
distribution costs. No distribution fees are paid by the Fund. The Fund also
receives reimbursement of 12b-1 distribution fees paid to E*TRADE Securities by
certain fund investments held in the portfolio of the Fund. Prior to November 2,
2005, Kobren Insight Brokerage, Inc. served as distributor of the Fund.
For the year ended December 31, 2005, expense reimbursements and other
reductions were as follows:
EXPENSES REIMBURSED BY INVESTMENT ADVISER OTHER REDUCTIONS (1)
----------------------------------------- --------------------
Kobren Growth Fund $73,430 $12,188
<FN>
(1) Reimbursements to the Fund from 12b-1 distribution fees.
</FN>
The Trust has also entered into an administration agreement with PFPC Inc.
(the "Administrator"), a member of PNC Financial Services Group, Inc. The
Administrator also serves as the Trust's transfer agent and dividend paying
agent. Mellon Trust of New England, N.A., an indirectly wholly-owned subsidiary
of Mellon Financial Corporation, serves as the Trust's custodian.
No officer, director or employee of KIM, E*TRADE FINANCIAL, 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 retainer 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 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 maintaining shareholder accounts at an annual rate of
up to 0.10% of the average daily balances of fund accounts invested through
those networks.
4. 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, 2005, were $ 25,647,819 and $17,585,323 of non-governmental
issues, respectively.
5. SHARES OF BENEFICIAL INTEREST: As of December 31, 2005, an unlimited number
of shares of beneficial interest, par value $0.001, were authorized for the
Trust. Changes in shares of beneficial interest for the Fund were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
RETAIL CLASS: SHARES AMOUNT SHARES AMOUNT
Shares sold 1,255,427 $ 17,677,387 374,224 $ 4,846,804
Shares issued as reinvestment of distributions 227,113 3,274,975 20,508 287,517
Shares redeemed (917,093) (13,054,871) (648,447) (8,453,504)
----------- ------------- --------- ------------
Net increase (decrease) 565,447 $ 7,897,491 (253,715) $(3,319,183)
=========== ============= ========= ============
At December 31, 2005, KIM and its affiliates owned 1,056,633 shares of the Fund
representing 22.9% of the total outstanding shares.
6. RISK FACTORS OF THE FUND: Indirectly investing in underlying funds
through Kobren Growth 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. The Fund, together with 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, the 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.
- --------------------------------------------------------------------------------
KOBREN INSIGHT FUNDS - 2005 ANNUAL REPORT 7
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
7. SHAREHOLDER VOTING (UNAUDITED): On October 19, 2005 the Fund held a Special
Meeting of Shareholders to approve a new investment advisory agreement. The
proposal was approved by shareholders and the results of the proposal are as
follows:
NUMBER OF SHARES
FOR 2,392,671.206
AGAINST 169,832.262
ABSTAIN 166,070.863
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES OF KOBREN INSIGHT FUNDS
AND THE SHAREHOLDERS OF KOBREN GROWTH FUND
We have audited the accompanying statement of assets and liabilities of the
KobrenGrowth Fund, a series of the Kobren Insight Funds (the "Trust"), including
the schedule of investments, as of December 31, 2005, and the related statement
of operations, the statement of changes in net assets and financial highlights
for the year then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended December 31,
2004 and the financial highlights for each of the four years in the period ended
December 31, 2004 have been audited by other auditors, whose report dated
February 11, 2005 expressed an unqualified opinion on such financial statement
and financial highlights.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
We were not engaged to performan audit of the Trust's internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of securities owned
as of December 31, 2005, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Kobren Growth Fund, as of December 31, 2005, and the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
TAIT, WELLER & BAKER LLP
PHILADELPHIA, PENNSYLVANIA
FEBRUARY 3, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8 KOBREN INSIGHT FUNDS - 2005 ANNUAL REPORT
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
FORM N-Q: The Trust files complete Portfolio of Investments for the Fund with
the U.S. Securities and Exchange Commission (the "SEC") for the Trust's first
and third quarters of each fiscal year on Form N-Q. The Trust's Forms N-Q are
available on the SEC's website at www.sec.gov and are available for review and
copying at the SEC's Public Reference Room in Washington, D.C. Information on
the operations of the Public Reference Room may be obtained by calling the SEC
at 1-800-SEC-0330.
PROXY VOTING: Kobren Growth Fund's Proxy Voting Policies and Procedures, used to
determine how to vote proxies relating to portfolio securities, are included in
the Trust's Statement of Additional Information ("SAI"), and is also available
(i) upon request, without charge, by calling 1-800-4KOBREN (800-456-2736); (ii)
on Kobren Growth Fund's website at www.kobren.com; and (iii) on the SEC's
website at www.sec.gov.
Kobren Growth Fund's Proxy Voting Record for the most recent twelve-month period
ended June 30 is available (i) upon request, without charge, by calling
1-800-4KOBREN (800-456-2736); (ii) on Kobren Growth Fund's website at
www.kobren.com; and (iii) on the SEC's website at www.sec.gov.
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE INVESTMENT
ADVISORY AGREEMENT
The Investment Company Act of 1940, as amended (the "1940 Act"), requires that
the investment advisory agreement (the "Investment Advisory Agreement") between
the Kobren Growth Fund (the "Fund"), a series of Kobren Insight Funds (the
"Trust"), and Kobren Insight Management, Inc. ("KIM") be approved initially (and
that its continuance be approved annually thereafter) by both the Trust's Board
of Trustees and a majority of the Trustees that are non-interested persons of
the Trust (the "Independent Trustees") voting separately. At a meeting held on
August 11, 2005, the Trustees unanimously approved the Investment Advisory
Agreement and determined that the terms of the Investment Advisory Agreement
were fair and reasonable. The Trustees determined that the approval of the
Investment Advisory Agreement would enable the Fund to continue to receive
quality investment advisory services, at a cost deemed reasonable and in the
best interests of the Fund and its shareholders, from KIM after the acquisition
(the "Acquisition") of KIM by E*TRADE FINANCIAL. The Acquisition occurred on
November 2, 2005.
In meetings specifically addressed to renewal of the Fund's prior investment
advisory agreement with KIM and the approval of the Investment Advisory
Agreement and at other meetings held during the course of the year, the
Trustees, including the Independent Trustees, requested, reviewed and
considered, and KIM provided, materials relating to KIM's investment and
management services under the Investment Advisory Agreement and the Fund's prior
investment advisory agreement. Among other written and oral information, these
materials included information regarding: (i) the investment performance of the
Fund, a peer group of funds and an index over various time periods, (ii) sales
and redemption data with respect to the Fund, (iii) the general investment
outlook in the markets in which the Fund invests, (iv) arrangements in respect
of the distribution of the Fund's shares, (v) the procedures employed to
determine the value of the Fund's assets, and (vi) the record of compliance with
the Fund's investment policies and restrictions and with the Fund's Code of
Ethics and the structure and responsibilities of KIM's compliance department.
As part of the review of the Investment Advisory Agreement, the Independent
Trustees requested, reviewed and considered, and KIM provided, additional
information in order to evaluate the quality of KIM's services and the
reasonableness of the fee under the Investment Advisory Agreement. Among other
items, this information included data or analyses of: (i) management and other
fees incurred by a peer group of funds, (ii) expense ratios for the Fund and a
peer group of funds, (iii) KIM's financial results and condition, including its
profitability from services performed for the Fund, (iv) investment management
staffing, and (v) the potential for achieving economies of scale in light of
expenses that are not incurred as fees based on a percentage of net assets.
The following summarizes matters considered by the Trustees in connection with
their approval of the Investment Advisory Agreement. However, the Trustees did
not identify any single factor as all-important or controlling, and the summary
does not detail all the matters that were considered.
NATURE, QUALITY AND EXTENT OF INVESTMENT ADVISORY SERVICES.
INVESTMENT PERFORMANCE. The Trustees reviewed the Fund's investment performance,
as well as the Fund's performance compared to both the performance of a peer
group and the results of an index. The Trustees noted that the Fund's
performance ranked it in the top 34%, 32% and 24% over each of the 1-, 3- and
5-year periods respectively as compared to the performance of similar funds in
its peer group category. Additionally, the Fund was awarded 4 stars by
Morningstar over the past 3-year and 5-year periods.(1) The Trustees
1 Morningstar rates mutual funds from one to five stars based on how well they
have performed (after adjusting for risk and accounting for all sales
charges) in comparison to similar funds. Within each Morningstar Category,
the top 10% of funds receive five stars, the next 22.5% receive four stars,
the middle 35% receive three stars, the next 22.5% receive two stars, and
the bottom 10% receive one star. Funds are rated for up to three time
periods -- 3-, 5- and 10-years -- and these ratings are combined to produce
an overall rating. Ratings are objective, based entirely on a mathematical
evaluation of past performance. They may be a useful tool for identifying
funds worthy of further research, but should not be considered buy or sell
recommendations.
- --------------------------------------------------------------------------------
KOBREN INSIGHT FUNDS -- 2005 ANNUAL REPORT 9
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
concluded that the performance of the Fund, together with other factors
considered by the Trustees, supported the approval of the Investment Advisory
Agreement.
KIM'S PERSONNEL AND METHODS. The Trustees reviewed the background of members of
the team responsible for the daily management of the Fund and the Fund's
investment objective and discipline. The Independent Trustees also had
discussions with senior management of KIM responsible for investment operations.
The Trustees also considered the favorable history, reputation, qualifications
and background of KIM as well as the qualifications of its personnel. The
Trustees concluded that KIM has the quality and depth of personnel and the
well-developed methods essential to performing its duties under the Investment
Advisory Agreement.
NATURE, QUALITY AND EXTENT OF OTHER SERVICES. The Trustees also considered the
nature, quality, cost and extent of the other services to be provided by KIM's
affiliate, E*TRADE Securities LLC ("E*TRADE Securities"), and of third party
service providers to the Fund. The Trustees noted the Fund's record of
compliance with its investment policies and restrictions, and the quality of
managerial and administrative services provided by KIM in an increasingly
regulated industry. The Trustees determined that KIM had policies and systems
reasonably designed to achieve compliance with the Fund's investment objective
and regulatory requirements. Based on these considerations, the Trustees
concluded that the nature, quality, cost and extent of such other services
provided by KIM are satisfactory and reliable and serve the shareholders of the
Fund well.
ADVISORY FEE AND EXPENSES. The Trustees considered KIM's fee under the
Investment Advisory Agreement relative to the advisory fees charged by a peer
group of funds. The Trustees also considered the Fund's expense ratio relative
to industry averages for the Fund's peer group category and the advisory fees
charged by KIM to other accounts. The Trustees noted that the Fund's advisory
fee rate and the Fund's expense ratio (after giving effect to the fee waiver)
were below the median advisory fee rate and expense ratio for the Fund's peer
group category. The Trustees viewed favorably the current and historic
willingness of KIM to limit the Fund's total expense ratio. The Trustees
concluded that the advisory fee is acceptable based upon qualifications,
experience, reputation and performance of KIM and the moderate overall expense
ratio of the Fund given the relatively small size of the Fund and the fund
complex.
PROFITABILITY. The Trustees considered the estimated level of profits of KIM and
its affiliates from their relationship with the Fund. This consideration
included a review of KIM's methodology in allocating certain of its costs to the
management of the Fund. The Trustees also considered the financial results
realized by KIM and its affiliates in connection with the operation of the Fund.
The Trustees recognized that increased fixed costs, particularly compliance,
legal and audit fees, have a greater impact on smaller fund families and their
advisers, such as the Trust and KIM, than on larger fund complexes and advisers.
The Trustees concluded that KIM's profits (which are either small or negative)
from management of the Fund, including the financial results derived from the
Fund, are eminently fair to the Fund for the management of the Fund in light of
the business risks involved.
ECONOMIES OF SCALE. The Trustees considered whether there have been economies of
scale in respect of the management of the Fund, whether the Fund has
appropriately benefited from any economies of scale, and whether there is
potential for realization of any further economies of scale. The Trustees
concluded that any perceived and potential economies of scale were not yet a
relevant consideration given the size of the Fund.
OTHER BENEFITS TO KIM AND ITS AFFILIATES. The Trustees also considered the
character and amount of other direct and incidental benefits received by KIM and
its affiliates from their association with the Fund. The Trustees concluded that
potential "fall-out" benefits that KIM and its affiliates may receive, such as
greater name recognition, appear to be reasonable, and may in some cases benefit
the Fund.
In evaluating the Investment Advisory Agreement, the Trustees also reviewed
materials furnished by E*TRADE FINANCIAL, including information regarding
E*TRADE FINANCIAL, its affiliates, personnel, operations and financial
condition. The Trustees also reviewed the terms of the Acquisition and its
possible effects on the Fund and its shareholders. Representatives of KIM
discussed with the Trustees the anticipated effects of the Acquisition, and,
together with a representative of E*TRADE FINANCIAL, indicated their belief that
as a consequence of the proposed transaction, the operations of the Fund and the
capabilities of KIM to provide advisory and other services to the Fund would not
be adversely affected and may be enhanced by the resources of E*TRADE FINANCIAL,
though there could be no assurance as to any particular benefits that may
result.
In their considerations, the Trustees deemed to be especially important the
experience of KIM's key personnel in portfolio management, the arrangements made
to secure the continued service of the key personnel in portfolio management,
the high quality and extent of research and management services KIM is expected
to continue to provide to the Fund, and the fair and reasonable compensation
proposed to be paid to KIM by the Fund under the Investment Advisory Agreement
and that the rate of such compensation is identical to the rate of compensation
under the prior advisory agreement (which they had recently reviewed and
approved). The Trustees also specifically considered the following as relevant
to their approval: (i) that the fee and expense ratios of the Fund are
reasonable given the quality of services expected to be provided and are
comparable to the fee and expense ratios of similar mutual funds; (ii) the
relative performance of the Fund since commencement of operations to comparable
mutual funds and unmanaged indices; (iii) that the terms
- --------------------------------------------------------------------------------
10 KOBREN INSIGHT FUNDS - 2005 ANNUAL REPORT
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
of the Investment Advisory Agreement are substantially identical to those
of the prior advisory agreement, except for a different execution date,
effective date and termination date, and the inclusion of escrow provisions
(which were applicable only in the event that the Acquisition closed prior to
the approval of the Investment Advisory Agreement by the Fund's shareholders);
(iv) the favorable history, reputation, qualification and background of KIM and
E*TRADE FINANCIAL, as well as the qualifications of their personnel and their
respective financial conditions; (v) the commitment of KIM and E*TRADE FINANCIAL
to pay the expenses of the Fund in connection with the Acquisition so that
shareholders of the Fund would not have to bear such expenses; (vi) the
possibility of benefits that may be realized by the Fund as a result of KIM's
affiliation with E*TRADE FINANCIAL, including any resources of E*TRADE FINANCIAL
that would be available to KIM; and (vii) other factors deemed relevant by the
Trustees.
DISCLOSURE OF FUND EXPENSES: We believe it is important for you to
understand the impact of fees regarding your investment. All mutual funds have
operating expenses. As a shareholder of a mutual fund, you incur ongoing costs,
which include costs for portfolio management, administrative services, and
shareholder reports (like this one), among others. Operating expenses, which are
deducted from a fund's gross income, directly reduce the investment return of
the fund. A fund's expenses are expressed as a percentage of its average net
assets. This figure is known as the expense ratio. The following examples are
intended to help you understand the ongoing fees (in dollars) of investing in
the Fund and to compare these costs with those of other mutual funds. The
examples are based on an investment of $1,000 made at the beginning of the
period shown and held for the entire period.
This table illustrates the Fund's costs in two ways:
ACTUAL FUND RETURN: This section helps you to estimate the actual expenses,
after any applicable fee waivers, that you paid over the period. The "Ending
Account Value" shown is derived from the Fund's actual return for the past six
month period, the "Expense Ratio" column shows the period's annualized expense
ratio, and the "Expenses Paid During Period" column shows the dollar amount that
would have been paid by an investor who started with $1,000 in the Fund at the
beginning of the period.
You may use the information here, together with your account value, to
estimate the expenses that you paid over the period. To do so, simply divide
your account value by $1,000 (for example, an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the number given for your Fund in the
first line under the heading entitled "Expenses Paid During Period."
HYPOTHETICAL 5% RETURN: This section is intended to help you compare your
Fund's costs with those of other mutual funds. It assumes that the Fund had an
annual return of 5% before expenses, but that the expense ratio is unchanged. In
this case, because the return used is not the Fund's actual return, the results
do not apply to your investment. This example is useful in making comparisons to
other mutual funds because the SEC requires all mutual funds to calculate
expenses based on an assumed 5% annual return. You can assess your Fund's costs
by comparing this hypothetical example with the hypothetical examples that
appear in shareholder reports of other funds.
Please note that the expense shown in the table are meant to highlight and
help you compare your ongoing costs only and do not reflect any transactional
costs such as sales charges (loads) and redemption fees, which are described in
the Prospectus. If these costs were applied to your account, your costs would be
higher.
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID
VALUE 7/01/05 VALUE 12/3105 EXPENSE RATIO(1) DURING PERIOD (2)
------------- ------------- ---------------- -----------------
Actual Fund Return: Retail Class $1,000 $1,083.80 1.00% $5.25
Hypothetical 5% Return: Retail Class $1,000 $1,020.16 1.00% $5.09
<FN>
(1) Annualized, based on the Fund's most recent fiscal half-year expenses.
(2) Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days in the
most recent fiscal half-year, then divided by 365.
</FN>
TAX INFORMATION:
The percentage of income from direct obligations of the U.S. Government in the
Fund was 18.27%.
During the year ended December 31, 2005, the Fund declared long-term capital
gains of $4,272,544.
For the fiscal year ended December 31, 2005 certain dividends paid by the
Fund may be subject to a maximum tax rate of 15%, as provided by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. Of the income paid, 59.57% of
income may qualify for the 15% dividend income tax rate. Complete information
will be computed and reported in conjunction with your 2005 Form 1099-DIV.
- --------------------------------------------------------------------------------
KOBREN INSIGHT FUNDS - 2005 ANNUAL REPORT 11
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
INFORMATION ABOUT TRUSTEES AND OFFICERS:
Information pertaining to the Trustees and officers of the Trust is set forth
below. The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function. The Statement of Additional Information (SAI) includes additional
information about the Trustees and is available without charge, upon request by
calling (toll free) 1-800-456-2736.
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Other
Term of Portfolios in Trusteeships/
Office Fund Complex Directorships
Name, Address, Age and and Length of Overseen by Held by
Position(s) with Trust TimeServed1 Principal Occupation(s) During Past 5 Years Trustee Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Edward B. Bloom 9 years Chief Financial Officer and Treasurer of 2 None
c/o 20 William Street, Suite 310 International Data Group Inc., a publishing
Wellesley Hills, MA 02481 company.
Age: 55, Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Arthur Dubroff 9 years Chief Financial Officer of Net2Phone, Inc., a 2 Virtual
c/o 20 William Street, Suite 310 provider of Voice over Internet Protocol telephony Communities,
Wellesley Hills, MA 02481 services, from November 2002 to present; Chief Inc.
Age: 55, Trustee Financial Officer of Virtual Communities, Inc, a
software provider, from July 2000 to the present;
Consultant for Turnberry Consulting, LLC from
October 1999 to present.
- ------------------------------------------------------------------------------------------------------------------------------------
Stuart J. Novick 9 years Senior Vice President, General Counsel and 2 None
c/o 20 William Street, Suite 310 Secretary of Children's Hospital Boston since
Wellesley Hills, MA 02481 April 1997.
Age: 55, Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES2
- ------------------------------------------------------------------------------------------------------------------------------------
Eric M. Kobren 9 years President of Mutual Fund Investors Association, 2 None
20 William Street, Suite 310 Inc.; President of Kobren Insight Management, Inc.
Wellesley Hills, MA 02481 and a registered representative of E*TRADE
Age: 52 Securities, LLC. These are a financial publishing
Chairman and President company, a registered investment advisory firm and
a registered broker-dealer, respectively. Prior to
November 2, 2005, President of Kobren Insight
Brokerage, Inc. Since 2001, Managing Member of
Alumni Capital, LLC, a General Partner to a
private investment partnership.
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICER(S) WHO ARE NOT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Eric J. Godes 9 years Managing Director of Kobren Insight Management, N/A N/A
20 William Street, Suite 310 Inc. and Managing Director and a registered
Wellesley Hills, MA 02481 representative of E*TRADE Securities, LLC. Prior
Age: 44 to November 2, 2005, Managing Director of Kobren
Chief Financial Officer, Vice Insight Brokerage, Inc. and Alumni Capital, LLC, a
President, Treasurer, Secretary registered broker-dealer and general partner to a
private investment partnership, respectively.
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Trustees serve for an indefinite term until the earliest of a Trustee's: (i)
removal by a two-thirds vote of the Board of Trustees or shareholders, (ii)
resignation, (iii) death, (iv) bankruptcy or (v) adjudicated incompetence.
2 "Interested person" of the Trust as defined in the 1940 Act. Mr. Kobren is
considered an "interested person" because of his affiliation with Kobren
Insight Management, Inc., which acts as the Trust's investment adviser.
</FN>
- --------------------------------------------------------------------------------
12 KOBREN INSIGHT FUNDS - 2005 ANNUAL REPORT
[GRAPHIC OMITTED]
KOBREN DELPHI VALUE FUND
INSIGHT ------------------------------------------------------------------------
FUNDS
ANNUAL REPORT DECEMBER 31, 2005
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
SCOTT M. BLACK PIC
Dear Shareholders,
We are pleased to report that the Delphi Value Fund outperformed all of the
popular indices - the Standard & Poor's 500 Index ("S&P 500"), the Dow Jones
Industrials, and the NASDAQ Composite - in 2005 with a gain of 6.7%
(institutional class, +7.0%). Notably, the six year span from January 1, 2000
through December 31, 2005, has been one of the worst performing periods for U.S.
equities, as a whole, since the demise of the "nifty fifty" in the 1970s.
Utilizing the S&P 500 as a proxy for the general market index, one finds that
common stocks actually declined 6.9% (even with dividends reinvested) over this
six year interval. Conversely, your Fund posted a 72.0% cumulative gain
(institutional class, +74.8%) corroborating the merits of value investing.
Purchasing solid businesses with high returns on equity and low price/earnings
ratios proved to be an effective antidote against the aftershocks of the
technology bubble.
During the second half of 2005, the Fund appreciated 5.3% (institutional
class, +5.4%) with the majority of the uptick in November and December. An
analysis of the individual holdings indicates that energy and technology issues
dominated the period winners. Two Canadian oil companies; Nexen (+56.8%) and
Talisman Energy (+40.8%); and XTO Energy (+29.3%) produced robust advances.
Three technology firms - MEMC Electronic Materials (silicon wafers), Western
Digital (disc drives), and Micron Technology (semiconductors) - surged 40.6%,
38.7%, and 30.4%, respectively. Additionally, individual names like Lamson &
Sessions (plastics, +111.7%), Toyota Motor (+46.3%), and Polo Ralph Lauren
(+30.2%) contributed favorably to the overall results. Amongst the
underachievers were Toll Brothers (-31.8%), IPC Holdings (-30.9%), and Dryships
(-26.0%). Toll, the largest U.S. builder of luxury homes, recognized record
sales and earnings, but forecast slower growth in 2006. IPC Holdings, a Bermuda
catastrophe reinsurer, was pummelled by Hurricanes Katrina, Rita, and Wilma.
Finally, Dryships, a major drybulk carrier with twenty-seven vessels, dropped
concomitantly with the decline in spot drybulk cargo rates. For the record,
Dryships is selling at 4x estimated 2006 earnings and 1.2x its tangible book
value.
Reviewing portfolio activity, one discovers that two energy and two
technology companies were added to the portfolio in the second half of 2005.
Apache, an international exploration and development corporation, and Pioneer
Drilling, onshore domestic rigs, were purchased at 7.8x and 10.0x expected 2006
earnings, respectively. Avnet, an electronics distributor, and Seagate
Technology, a large U.S. manufacturer of disc drives, were acquired at 12.7x and
8.3x the forthcoming year's earnings. All four have appreciated since their
initial purchases. To offset some realized gains, we divested a handful of
positions with weak fundamentals; namely, Helen of Troy, Pfizer, Jones Apparel
Group, and Montpelier Re Holdings.
While Delphi does not possess a crystal ball, we foresee a good year in
2006 for U.S. equities. Our internal model demonstrates that the S&P 500 was
approximately 8% to 12% undervalued at year end 2005. We are optimistic that
real Gross Domestic Product ("GDP") will grow 31/2% in 2006 with consumer price
inflation of 21/2%. U.S. corporate profits should accelerate 6% in line with
nominal GDP since corporate earnings as a percentage of GDP are already at a
record high ratio. Most important, the Federal Reserve Board (the "Fed") should
be nearing the end of its rate hikes. As we write this letter, we believe Mr.
Greenspan will raise the Fed Funds rate to 41/2% in January. Also, we think Ben
Bernanke, to prove that he is an "inflation fighter," will add another 25 basis
points in March; thereafter, the Fed policy should be benign. While the twin
deficits - fiscal budgetary ($400 billion) and balance of trade ($700 billion)
are worrisome - the U.S. economy will navigate successfully through these roiled
waters. Quite simply, China must increase exports to the United States to
maintain its 8%+ economic growth rate and to provide incremental employment in
its country. Hence, China along with Japan and the Mideast oil kingdoms will
continue to recycle a portion of their dollar holdings into U.S. Treasuries
thereby underwriting our fiscal deficit.
We thank you for your continued support and wish you a healthy and
prosperous New Year.
Best Regards,
/S/ SCOTT M. BLACK
Scott M. Black
President
- --------------------------------------------------------------------------------
FUND OVERVIEW
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
- --------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED 12/23/98
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF PLOT POINTS IN PRINTED GRAPHIC
Delphi Value Fund Retail Class $19,357
Russell Midcap Value Index $21,743
TOTAL RETURN
12 Months 5 Year Annualized
Ended Annualized Since Inception
12/31/05 Return (12/23/98)
Retail Class +6.7% +7.9% +9.9%
Institutional Class +7.0% +8.2% +10.2%
Russell Midcap Value +12.6% +12.2% +11.7%
NET ASSET VALUE - 12/31/05
Retail Class: $17.32 Institutional Class: $17.61
TOTAL NET ASSETS
$124,519,824
TOP TEN EQUITY HOLDINGS*
SECURITY SECTOR ALLOC (%)
Berkshire Hathaway - Class B Conglomerates 2.7
XTO Energy, Inc. Energy 2.1
Lehman Brothers Holdings, Inc. Financial Services 1.9
MEMC Electronic Materials, Inc. Aerospace/Technology 1.8
Nexen, Inc. Energy 1.7
Toyota Motor Corp., SP ADR Consumer Related 1.6
Talisman Energy, Inc. Energy 1.6
Western Digital Corp. Aerospace/Technology 1.6
Bear Stearns Cos., Inc. Financial Services 1.6
D.R. Horton, Inc. Construction & Real Estate 1.6
*As a percent of total net assets.
SECTORS
Cash & Net Other Assets and Liabilities 5.3%
Banking 9.5%
Conglomerates 4.2%
Publishing & Broadcasting 9.2%
Insurance 8.2%
Food & Beverage 2.2%
Transportation 3.0%
Textiles & Apparel 2.6%
Retail 3.5%
Equity 94.7%
Financial Services 9.8%
Manufacturing 4.7%
Construction & Real Estate 7.6%
Consumer Related 3.7%
Basic Materials 5.9%
Energy 11.5%
ASSET ALLOCATION
Cash & Net Other Assets and Liabilities 5.3%
Equity 94.7%
- --------------------------------------------------------------------------------
Kobren Insight Management, Inc. is the Fund's adviser, Delphi Management, Inc.
is the sub-adviser and E*TRADE Securities LLC, is the distributorof the Fund.
Performance data reflects past performance and is not a guarantee of future
returns. PERFORMANCE DATA DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A
SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TOTAL RETURN FIGURES INCLUDE REINVESTMENTOF ALL DISTRIBUTIONS. INVESTMENT
RETURNS AND PRINCIPAL VALUES FLUCTUATE WITH CHANGING MARKET CONDITIONS, SO THAT
WHEN REDEEMED, SHARESMAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The
Russell Midcap Value Index is an unmanaged index of common stocks. The Adviser
absorbedcertain expenses of the Fund during certain periods, without which the
total return would be lower. Portfolio holdings and percentages of the Fundmay
change at any time. THIS REPORT MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS.
PLEASE READ IT CAREFULLY BEFORE INVESTING. YOU MAYOBTAIN A PROSPECTUS OR CURRENT
PERFORMANCE INFORMATION BY CALLING 1-800-4KOBREN (1-800-456-2736) OR BY VISITING
WWW.KOBREN.COM.
- --------------------------------------------------------------------------------
2 DELPHI VALUE FUND -- 2005 ANNUAL REPORT
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
SHARES VALUE (NOTE 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 94.69%
- --------------------------------------------------------------------------------
AEROSPACE/TECHNOLOGY - 9.09%
-------------------------------------------------------------------------------
37,400 Arrow Electronics, Inc. (1) $ 1,197,922
54,800 Avnet, Inc. (1) 1,311,912
31,100 Ingersoll-Rand Co., Ltd., Class A 1,255,507
103,200 MEMC Electronic Materials, Inc. (1) 2,287,944
118,400 Micron Technology, Inc. (1) 1,575,904
84,000 Seagate Technology (1) 1,679,160
108,000 Western Digital Corp. (1) 2,009,880
---------------
11,318,229
BANKING - 9.54%
- --------------------------------------------------------------------------------
36,600 Citigroup, Inc. 1,776,198
69,100 Colonial BancGroup, Inc. 1,645,962
50,400 Community Bank System, Inc. 1,136,520
59,900 North Fork Bancorporation, Inc. 1,638,864
61,500 Southwest Bancorp, Inc. 1,230,000
43,000 TD Banknorth, Inc. 1,249,150
29,700 Webster Financial Corp. 1,392,930
28,815 Wells Fargo & Co. 1,810,447
---------------
11,880,071
BASIC MATERIALS - 5.87%
- --------------------------------------------------------------------------------
30,050 Cytec Industries, Inc. 1,431,281
36,000 Dow Chemical Co. 1,577,520
41,500 Inco, Ltd. 1,808,155
36,300 NOVA Chemicals Corp. 1,212,420
25,975 POSCO, ADR 1,286,022
---------------
7,315,398
CONGLOMERATES - 4.22%
- --------------------------------------------------------------------------------
1,164 Berkshire Hathaway, Inc., Class B (1) 3,416,922
17,800 Norsk Hydro ASA, SP ADR 1,836,604
---------------
5,253,526
CONSTRUCTION & REAL ESTATE - 7.62%
- --------------------------------------------------------------------------------
20,400 Boston Properties, Inc., REIT 1,512,252
54,069 D.R. Horton, Inc. 1,931,885
31,080 Lennar Corp., Class A 1,896,502
51,000 Sunstone Hotel Investors, Inc., REIT 1,355,070
36,000 Toll Brothers, Inc. (1) 1,247,040
73,400 U-Store-It Trust, REIT 1,545,070
---------------
9,487,819
CONSUMER RELATED - 3.72%
- --------------------------------------------------------------------------------
58,000 Disney (Walt) Co. 1,390,260
88,700 La-Z-Boy, Inc. 1,202,772
19,500 Toyota Motor Corp., SP ADR 2,040,090
---------------
4,633,122
ENERGY - 11.53%
- --------------------------------------------------------------------------------
12,200 Apache Corp. 835,944
83,000 Denbury Resources, Inc. (1) 1,890,740
28,900 Marathon Oil Corp. 1,762,033
43,885 Nexen, Inc. 2,090,242
71,600 Pioneer Drilling Co. (1) 1,283,788
38,300 Talisman Energy, Inc. 2,025,304
47,300 Whiting Petroleum Corp. (1) 1,892,000
58,588 XTO Energy, Inc. 2,574,357
---------------
14,354,408
FINANCIAL SERVICES - 9.80%
- --------------------------------------------------------------------------------
31,000 American Express Co. 1,595,260
17,084 Bear Stearns Cos., Inc. 1,973,714
15,000 Goldman Sachs Group, Inc. 1,915,650
61,800 H&R Block, Inc. 1,517,190
34,500 iStar Financial, Inc., REIT 1,229,925
18,200 Lehman Brothers Holdings, Inc. 2,332,694
28,855 Morgan Stanley 1,637,233
---------------
12,201,666
FOOD & BEVERAGE - 2.17%
- --------------------------------------------------------------------------------
52,000 Pepsi Bottling Group, Inc. 1,487,720
100,615 Ryan's Restaurant Group, Inc. (1) 1,213,417
---------------
2,701,137
SHARES VALUE (NOTE 1)
- --------------------------------------------------------------------------------
INSURANCE - 8.16%
- --------------------------------------------------------------------------------
60,200 Aspen Insurance Holdings, Ltd. $ 1,424,934
39,000 IPC Holdings, Ltd. 1,067,820
37,900 PMI Group, Inc. (The) 1,556,553
29,500 Radian Group, Inc. 1,728,405
31,200 RenaissanceRe Holdings, Ltd. 1,376,232
29,960 SAFECO Corp. 1,692,740
19,600 XL Capital, Ltd., Class A 1,320,648
---------------
10,167,332
MANUFACTURING - 4.71%
- --------------------------------------------------------------------------------
26,550 BorgWarner, Inc. 1,609,727
32,000 Briggs & Stratton Corp. 1,241,280
64,475 Lamson & Sessions Co. (1) 1,613,164
46,375 Masco Corp. 1,400,061
---------------
5,864,232
PUBLISHING & BROADCASTING - 9.21%
- --------------------------------------------------------------------------------
49,900 Comcast Corp., Class A (1) 1,281,931
22,000 Gannett Co., Inc. 1,332,540
37,500 Lee Enterprises, Inc. 1,384,125
151,500 Liberty Media Corp., Class A (1) 1,192,305
23,000 McClatchy Co., Class A 1,359,300
35,000 McGraw-Hill Cos., Inc. 1,807,050
88,800 News Corp., Class B 1,474,968
2,135 Washington Post Co., Class B 1,633,275
---------------
11,465,494
RETAIL - 3.48%
- --------------------------------------------------------------------------------
59,000 American Eagle Outfitters, Inc. 1,355,820
39,500 Ethan Allen Interiors, Inc. 1,442,935
23,100 Federated Department Stores, Inc. 1,532,223
---------------
4,330,978
TEXTILES & APPAREL - 2.59%
- --------------------------------------------------------------------------------
40,700 Liz Claiborne, Inc. 1,457,874
31,500 Polo Ralph Lauren Corp. 1,768,410
---------------
3,226,284
TRANSPORTATION - 2.98%
- --------------------------------------------------------------------------------
3,800 Arkansas Best Corp. 165,984
73,000 Dryships, Inc. 892,053
77,400 OMI Corp. 1,404,810
31,430 Teekay Shipping Corp. 1,254,057
---------------
3,716,904
TOTAL COMMON STOCKS 117,916,600
(Cost $77,397,947)
INVESTMENT COMPANY - 6.49%
8,077,948 Dreyfus Cash Management Plus Fund (2) 8,077,948
---------------
TOTAL INVESTMENT COMPANY 8,077,948
---------------
(Cost $8,077,948)
TOTAL INVESTMENTS - 101.18% 125,994,548
(Cost $85,475,895*)
LIABILITIES NET OF CASH &
OTHER ASSETS - (1.18%) (1,474,724)
---------------
TOTAL NET ASSETS - 100.00% $ 124,519,824
===============
- --------------------------------------------------------------------------------
(1) Non-income producing.
(2) An affiliate of the Custodian.
ADR American Depositary Receipt
REIT Real Estate Investment Trust
SP ADR Sponsored American Depositary Receipt
* For Federal income tax purposes, cost is $85,475,895 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $41,664,453
Unrealized depreciation: (1,145,800)
------------
Net unrealized appreciation: $40,518,653
============
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DELPHI VALUE FUND - 2005 ANNUAL REPORT 3
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
ASSETS:
Investments, at cost $ 85,475,895
===============
Investments, at value (Note 1) (See Portfolio of Investments) $ 125,994,548
Dividends receivable 222,334
Receivable for shares sold 20,047
Prepaid expenses and other assets 7,908
---------------
Total assets 126,244,837
---------------
LIABILITIES:
Payable for investments purchased 297,311
Payable for shares redeemed 1,253,140
Investment advisory fee payable (Note 2) 107,885
Distribution fee payable (Note 2) 14,243
Accrued trustees' fees and expenses (Note 2) 6,034
Accrued expenses and other payables 46,400
---------------
Total liabilities 1,725,013
---------------
NET ASSETS $ 124,519,824
===============
NET ASSETS CONSIST OF:
Accumulated net realized gain on investments sold $ 1,294,008
Net unrealized appreciation of investments 40,518,653
Par value (Note 5) 7,132
Paid-in capital 82,700,031
---------------
NET ASSETS $ 124,519,824
===============
COMPUTATION OF NET ASSET VALUE
RETAIL CLASS SHARES:
Net asset value, offering and redemption price per share
($65,959,062 / 3,807,276 shares) (unlimited authorization) $ 17.32
===============
INSTITUTIONAL CLASS SHARES:
Net asset value, offering and redemption price per share
($58,560,762 / 3,325,124 shares) (unlimited authorization) $ 17.61
===============
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 DELPHI VALUE FUND - 2005 ANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME:
Dividends $ 2,064,322
---------------
Total investment income 2,064,322
---------------
EXPENSES:
Investment advisory fee (Note 2) 1,216,573
Administration fee (Note 2) 103,577
Transfer agent fees (Note 2) 68,595
Sub-transfer agent fee (Retail Class) (Note 3) 27,575
Custodian fees (Note 2) 25,821
Professional fees 52,182
Trustees' fees and expenses (Note 2) 31,928
Registration and filing fees 30,500
Reports to shareholders 7,745
Distribution fees (Retail Class) (Note 2) 162,041
Other 13,695
---------------
Total expenses 1,740,232
---------------
NET INVESTMENT INCOME 324,090
---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from security transactions 7,173,092
Net change in unrealized appreciation of investments 589,180
---------------
Net realized and unrealized gain on investments 7,762,272
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,086,362
===============
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DELPHI VALUE FUND - 2005 ANNUAL REPORT 5
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
2005 2004
-------------- -------------
Net investment income (loss) $ 324,090 $ (167,929)
Net realized gain from security transactions 7,173,092 3,900,950
Net change in unrealized appreciation of investments 589,180 9,919,259
-------------- -------------
Net increase in net assets resulting from operations 8,086,362 13,652,280
Distribution to shareholders from:
Retail Shares:
Net investment income (113,094) --
Net realized gains on investments (3,698,826) (2,014,197)
-------------- -------------
Total distributions (3,811,920) (2,014,197)
Institutional Shares:
Net investment income (266,899) --
Net realized gains on investments (3,260,607) (1,691,208)
-------------- -------------
Total distributions (3,527,506) (1,691,208)
Total distributions to shareholders (7,339,426) (3,705,405)
-------------- -------------
Net increase in net assets from fund share transactions (Note 5) 2,936,190 4,514,305
-------------- -------------
Net increase in net assets 3,683,126 14,461,180
-------------- -------------
NET ASSETS:
Beginning of period 120,836,698 106,375,518
-------------- -------------
End of period (including line A) $ 124,519,824 $120,836,698
============== =============
(A) Accumulated undistributed net investment income $ -- $ --
============== =============
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6 DELPHI VALUE FUND - 2005 ANNUAL REPORT
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A FUND SHARE OUTSTANDING THROUGHOUT THE YEAR
RETAIL CLASS SHARES
FOR THE YEAR ENDED
12/31/2005 12/31/2004 12/31/2003 12/31/2002 12/31/2001
---------- ---------- ---------- ---------- ----------
Net asset value - beginning of period $ 17.23 $ 15.79 $ 11.91 $ 13.18 $ 13.00
Net investment income (loss) 0.02 (0.05) (0.03) (0.02) (0.02)
Net realized and unrealized gain (loss)
on investments 1.12 2.04 3.91 (1.25) 0.27
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from investment operations 1.14 1.99 3.88 (1.27) 0.25
Distributions from net investment income (0.03) -- -- -- --
Distributions from net realized gains
on investments (1.02) (0.55) -- -- (0.07)
---------- ---------- ---------- ---------- ----------
Total distributions (1.05) (0.55) -- -- (0.07)
Net asset value - end of period $ 17.32 $ 17.23 $ 15.79 $ 11.91 $ 13.18
========== ========== ========== ========== ==========
Total return (a) 6.66% 12.52% 32.58% (9.64)% 1.90%
========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 65,959 $ 65,446 $ 61,197 $ 43,808 $ 44,744
Ratio of net investment income (loss)
to average net assets 0.13% (0.28)% (0.21)% (0.13)% (0.12)%
Ratio of operating expenses to average
net assets before fees waived and/or
expenses reimbursed by investment
adviser and administrator 1.57% 1.58% 1.64% 1.63% 1.64%
Ratio of operating expenses to average
net assets after waivers and/or
expense reimbursements 1.57% 1.58% 1.64% 1.63% 1.64%
Portfolio turnover rate 22% 31% 22% 23% 29%
<FN>
- --------------------------------------------------------------------------------
(a) Total return represents aggregate total return for the period indicated and
assumes reinvestment of all distributions.
</FN>
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DELPHI VALUE FUND - 2005 ANNUAL REPORT 7
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A FUND SHARE OUTSTANDING THROUGHOUT THE YEAR
INSTITUTIONAL CLASS SHARES
FOR THE YEAR ENDED
12/31/2005 12/31/2004 12/31/2003 12/31/2002 12/31/2001
---------- ---------- ---------- ---------- ----------
Net asset value - beginning of period $ 17.49 $ 15.98 $ 12.02 $ 13.26 $ 13.05
Net investment income 0.07 -- 0.01 0.02 0.02
Net realized and unrealized gain (loss)
on investments 1.15 2.06 3.95 (1.26) 0.26
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from investment operations 1.22 2.06 3.96 (1.24) 0.28
Distributions from net investment income (0.08) -- -- -- --
Distributions from net realized gains
on investments (1.02) (0.55) -- -- (0.07)
---------- ---------- ---------- ---------- ----------
Total distributions (1.10) (0.55) -- -- (0.07)
Net asset value - end of period $ 17.61 $ 17.49 $ 15.98 $ 12.02 $ 13.26
========== ========== ========== ========== ==========
Total return (a) 6.97% 12.87% 32.95% (9.35)% 2.12%
========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 58,561 $ 55,390 $ 45,179 $ 33,596 $ 27,938
Ratio of net investment income to
average net assets 0.42% 0.02% 0.08% 0.17% 0.18%
Ratio of operating expenses to average
net assets before fees waived and/or
expenses reimbursed by investment
adviser and administrator 1.28% 1.28% 1.35% 1.33% 1.34%
Ratio of operating expenses to average
net assets after waivers and/or
expense reimbursements 1.28% 1.28% 1.35% 1.33% 1.34%
Portfolio turnover rate 22% 31% 22% 23% 29%
<FN>
- --------------------------------------------------------------------------------
(a) Total return represents aggregate total return for the period indicated and
assumes reinvestment of all distributions.
</FN>
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8 DELPHI VALUE FUND - 2005 ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
1. ORGANIZATION AND 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, 2005, the Trust offered shares of two funds, Kobren
Growth Fund and Delphi Value Fund (the "Funds"). Information presented in these
financial statements pertains only to the Delphi Value Fund (the "Fund"). The
Fund is authorized to issue two classes of shares - the Retail Class and the
Institutional Class. Each class of shares outstanding bears the same voting,
dividend, liquidation and other rights and conditions, except that the expenses
incurred in the distribution and marketing of such shares are different for each
class. Additionally, the Retail Class is subject to 12b-1 fees and sub-transfer
agent fees. The Fund seeks to achieve its investment objective by investing
primarily in equity securities of U.S. companies. Investment income, common
expenses and realized and unrealized gains and losses are allocated among the
share classes of the Fund based on the relative net assets of each class. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
USE OF ESTIMATES -- The preparation of financial statements in accordance with
U.S. 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.
PORTFOLIO VALUATION -- Investment securities are valued at the last sale price
on the securities exchange or national securities market on which such
securities primarily are traded or for NASDAQ traded securities, the NASDAQ
Official Closing Price. 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 with remaining maturities of
60 days or less 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 gain (including net short-term capital gain), if any, annually,
unless offset by any available capital loss carryforward. 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 gain on various investment securities held by the Fund. The tax
character of distributions paid during 2005 and 2004 was as follows:
DISTRIBUTIONS PAID IN 2005 DISTRIBUTIONS PAID IN 2004
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME CAPITAL GAINS INCOME CAPITAL GAINS
------ ------------- ------ -------------
Delphi Value Fund $ 320,893 $ 7,018,533 $ -- $ 3,705,405
As of December 31, 2005, the components of distributable earnings on a tax basis
were as follows:
CAPITAL LOSS UNDISTRIBUTED UNDISTRIBUTED UNREALIZED
CARRYFORWARD ORDINARY INCOME LONG-TERM GAIN APPRECIATION
------------ --------------- -------------- ------------
Delphi Value Fund $ -- $ -- $ 1,294,008 $ 40,518,653
Net investment income and realized gain and loss for federal income tax purposes
may differ from that reported in the financial statements because of permanent
book and tax basis differences. Permanent book and tax differences of $55,903,
$(55,904) and $1 were reclassified at December 31, 2005 among undistributed net
investment income, accumulated net realized loss on investments and
paid-in-capital, respectively, for the Fund. These reclasses were related to
redesignations and litigation income reclassed to capital.
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 the Fund is informed of the ex-dividend date. The Fund
estimates the components of distributions received from Real Estate Investment
Trusts (REITs). Distributions received in excess of income are recorded as a
reduction of cost of investments and/or as a realized gain. Interest income is
recognized on the accrual basis. All discounts/premiums are accreted/amortized
using the effective yield method.
- --------------------------------------------------------------------------------
DELPHI VALUE FUND - 2005 ANNUAL REPORT 9
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
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 of 1986, as amended, applicable to regulated investment companies, by
distributing substantially all of its earnings to its shareholders. Therefore,
no federal income or excise tax provision is applicable.
EXPENSES -- Expenses of the Trust which are directly identifiable to a specific
fund are allocated to that fund. Other expenses of the Trust are allocated
between the funds based upon relative net assets of each fund. Other expenses of
the Trust are allocated equally to those funds in the Trust.
COMMITMENTS AND CONTINGENCIES -- In the normal course of business, the Trust
enters into contracts on behalf of the Fund that contain a variety of provisions
for general indemnifications. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that are not known at this time. However, based on experience,
the Fund believes the risk of loss is remote.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE, DISTRIBUTION AND SHAREHOLDER
SERVICING FEES AND OTHER RELATED PARTY TRANSACTIONS
The Trust has entered into an investment advisory agreement with Kobren Insight
Management, Inc. ("KIM"), which was acquired by E*TRADE FINANCIAL Corporation
("E*TRADE FINANCIAL") on November 2, 2005. KIM has engaged Delphi Management,
Inc. ("Delphi") as the Fund's sub-adviser. 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 sub-adviser 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. This voluntary agreement may be terminated at the
discretion of the Adviser.
The Trust has also entered into an administration agreement with PFPC Inc. (the
"Administrator"), a member of PNC Financial Services Group, Inc. The
Administrator also serves as the Trust's transfer agent and dividend paying
agent. Mellon Trust of New England, N.A., an indirectly wholly-owned subsidiary
of Mellon Financial Corporation, serves as the Trust's custodian.
Prior to November 2, 2005, Kobren Insight Brokerage, Inc. served as distributor
of the Fund. As of November 2, 2005, E*TRADE Securities LLC ("E*TRADE
Securities"), an affiliate of KIM, serves as distributor of the Fund.
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 E*TRADE Securities a monthly 12b-1 fee for distribution services
provided, at an annual rate of 0.25% of the average daily net assets
attributable to the Retail Class of shares.
No officer, director or employee of KIM, E*TRADE FINANCIAL, 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 retainer 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 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 maintaining shareholder accounts at an annual rate of up to
0.10% of the average daily balances of fund accounts invested through those
networks.
4. 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,
2005, were $25,478,795 and $27,232,926 of non-governmental issues, respectively.
- --------------------------------------------------------------------------------
10 DELPHI VALUE FUND - 2005 ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
5. SHARES OF BENEFICIAL INTEREST
As of December 31, 2005, 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:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------
RETAIL CLASS: SHARES AMOUNT SHARES AMOUNT
- ------------- ------ ------ ------ ------
Shares sold 304,820 $ 5,325,980 739,617 $ 12,001,530
Shares issued as reinvest-
ment of distributions 200,700 3,490,184 105,381 1,814,669
Shares redeemed (497,504) (8,653,157) (920,299) (15,010,419)
----------- ----------- ----------- -----------
Net increase (decrease) 8,016 $ 163,007 (75,301) $ (1,194,220)
=========== =========== =========== ===========
INSTITUTIONAL CLASS:
Shares sold 285,805 $ 5,084,300 651,692 $ 10,841,916
Shares issued as reinvest-
ment of distributions 178,630 3,158,174 94,655 1,654,567
Shares redeemed (306,176) (5,469,291) (406,297) (6,787,958)
----------- ----------- ----------- -----------
Net increase 158,259 $ 2,773,183 340,050 $ 5,708,525
=========== =========== =========== ===========
Total net increase from fund
share transactions $ 2,936,190 $ 4,514,305
=========== ===========
At December 31, 2005, KIM, Delphi and their affiliates owned 627,995 Retail
Class shares and 25,830 Institutional Class shares of the Fund representing
16.5% and 0.8%, respectively, of the outstanding shares. Discretionary accounts
managed by KIM for management clients collectively held 1,859,791shares of the
Institutional Class representing 55.9% of the outstanding shares.
6. SHAREHOLDER VOTING (UNAUDITED): On October 19, 2005, the Fund held a Special
Meeting of Shareholders for the following purposes: (1) approve a new investment
advisory agreement; (2) approve a new investment sub-advisory agreement; and (3)
for the retail class only, approve a new Rule 12b-1 distribution plan. The
proposals were approved by shareholders and the results of the proposals are as
follows:
Proposal 1: Approval of a new Investment Advisory Agreement NUMBER OF SHARES
----------------
FOR 4,060,236.386
AGAINST 78,379.290
ABSTAIN 56,036.132
Proposal 2: Approval of Investment Sub-advisory Agreement NUMBER OF SHARES
----------------
FOR 4,066,078.592
AGAINST 70,704.831
ABSTAIN 53,868.385
Proposal 3: Approval of Rule 12b-1 Distribution Plan (Retail Class only) NUMBER OF SHARES
----------------
FOR 1,916,325.944
AGAINST 126,410.783
ABSTAIN 42,244.810
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DELPHI VALUE FUND - 2005 ANNUAL REPORT 11
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES OF KOBREN INSIGHT FUNDS
AND THE SHAREHOLDERS OF DELPHI VALUE FUND
We have audited the accompanying statement of assets and liabilities of the
Delphi Value Fund, a series of the Kobren Insight Funds (the "Trust"), including
the schedule of investments, as of December 31, 2005, and the related statement
of operations, the statement of changes in net assets and financial highlights
for the year then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended December 31,
2004 and the financial highlights for each of the four years in the period ended
December 31, 2004 have been audited by other auditors, whose report dated
February 11, 2005 expressed an unqualified opinion on such financial statement
and financial highlights.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 2005, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Delphi Value Fund, as of December 31, 2005, and the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
PHILADELPHIA, PENNSYLVANIA TAIT, WELLER & BAKER LLP
FEBRUARY 3, 2006
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ADDITIONAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
FORM N-Q: The Trust files complete Portfolio of Investments for the Fund with
the U.S. Securities and Exchange Commission (the "SEC") for the Trust's first
and third quarters of each fiscal year on Form N-Q. The Trust's Forms N-Q are
available on the SEC's website at www.sec.gov and are available for review and
copying at the SEC's Public Reference Room in Washington, D.C. Information on
the operations of the Public Reference Room may be obtained by calling the SEC
at 1-800SEC-0330.
PROXY VOTING: Delphi Value Fund's Proxy Voting Policies and Procedures, used to
determine how to vote proxies relating to portfolio securities, are included in
the Trust's Statement of Additional Information ("SAI"), and are also available
(i) upon request, without charge, by calling 1-800-4KOBREN (800-456-2736); (ii)
on Delphi Value Fund's website at www.kobren.com; and (iii) on the SEC's website
at www.sec.gov.
Delphi Value Fund's Proxy Voting Record for the most recent twelve-month period
ended June 30 is available (i) upon request, without charge, by calling
1-800-4KOBREN (800-456-2736); (ii) on Delphi Value Fund's website at
www.kobren.com; and (iii) on the SEC's website at www.sec.gov.
- --------------------------------------------------------------------------------
12 DELPHI VALUE FUND - 2005 ANNUAL REPORT
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ADDITIONAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE INVESTMENT
ADVISORY AGREEMENT AND SUBADVISORY AGREEMENT
The Investment Company Act of 1940, as amended (the "1940 Act"), requires that
the investment advisory agreement (the "Investment Advisory Agreement") between
the Delphi Value Fund (the "Fund"), a series of Kobren Insight Funds (the
"Trust"), and Kobren Insight Management, Inc. ("KIM"), and the investment
subadvisory agreement (the "Investment Subadvisory Agreement") between KIM and
Delphi Management, Inc. ("Delphi" and together with the Investment Advisory
Agreement, the "Investment Advisory Agreements") be approved initially (and that
their continuance be approved annually thereafter) by both the Trust's Board of
Trustees and a majority of the Trustees that are non-interested persons of the
Trust (the "Independent Trustees") voting separately. At a meeting held on
August 11, 2005, the Trustees unanimously approved the Investment Advisory
Agreements and determined that the terms of the Investment Advisory Agreements
were fair and reasonable. The Trustees determined that the approval of the
Investment Advisory Agreements would enable the Fund to continue to receive
quality investment advisory and subadvisory services, at a cost deemed
reasonable and in the best interests of the Fund and its shareholders, from KIM
and Delphi after the acquisition (the "Acquisition") of KIM by E*TRADE FINANCIAL
Corporation ("E*TRADE FINANCIAL"). The Acquisition occurred on November 2, 2005.
In meetings specifically addressed to renewal of the Fund's prior investment
advisory agreement with KIM and prior investment subadvisory agreement with
Delphi and the approval of the Investment Advisory Agreements, and at other
meetings held during the course of the year, the Trustees, including the
Independent Trustees, requested, reviewed and considered, and KIM and Delphi
provided, materials relating to KIM's and Delphi's investment and management
services under the Investment Advisory Agreements and the Fund's prior
investment advisory agreement and prior investment subadvisory agreement. Among
other written and oral information, these materials included information
regarding: (i) the investment performance of the Fund, a peer group of funds and
an index over various time periods, (ii) sales and redemption data with respect
to the Fund, (iii) the general investment outlook in the markets in which the
Fund invests, (iv) arrangements in respect of the distribution of the Fund's
shares, (v) the procedures employed to determine the value of the Fund's assets,
and (vi) the record of compliance with the Fund's investment policies and
restrictions and with the Fund's Code of Ethics and the structure and
responsibilities of KIM's and Delphi's compliance departments.
As part of the review of the Investment Advisory Agreements, the Independent
Trustees requested, reviewed and considered, and KIM and Delphi provided,
additional information in order to evaluate the quality of KIM's and Delphi's
services and the reasonableness of the fees under the Investment Advisory
Agreements. Among other items, this information included data or analyses of:
(i) management and other fees incurred by a peer group of funds, (ii) expense
ratios for the Fund and a peer group of funds, (iii) KIM's financial results and
condition, including its profitability from services performed for the Fund,
(iv) the fees paid to Delphi by KIM, (v) investment management staffing, and
(vi) the potential for achieving economies of scale in light of expenses that
are not incurred as fees based on a percentage of net assets.
The following summarizes matters considered by the Trustees in connection with
their approval of the Investment Advisory Agreements. However, the Trustees did
not identify any single factor as all-important or controlling, and the summary
does not detail all the matters that were considered.
NATURE, QUALITY AND EXTENT OF INVESTMENT ADVISORY SERVICES.
INVESTMENT PERFORMANCE. The Trustees also reviewed the Fund's investment
performance, as well as the Fund's performance compared to both the performance
of a peer group and the results of an index. The Trustees noted that the Fund's
performance ranked it in the top 78%, 77% and 78% over each of the 1-, 3- and
5-year periods, respectively, as well as outperforming the Standard & Poor's 500
Index (the "S&P 500" Index) over those periods. Additionally, the Fund was
awarded 3 stars by Morningstar over the past 3-year and 5-year periods.(1) The
Trustees concluded that the performance of the Fund, together with other factors
considered by the Trustees, supported the approval of the Investment Advisory
Agreements.
KIM'S AND DELPHI'S PERSONNEL AND METHODS. The Trustees reviewed the background
of members of the team responsible for the daily management of the Fund and the
Fund's investment objective and discipline. The Independent Trustees also had
discussions with senior management of Delphi responsible for investment
operations. The Trustees also considered the
1 Morningstar rates mutual funds from one to five stars based on how well they
have performed (after adjusting for risk and accounting for all sales
charges) in comparison to similar funds. Within each Morningstar Category,
the top 10% of funds receive five stars, the next 22.5% receive four stars,
the middle 35% receive three stars, the next 22.5% receive two stars, and
the bottom 10% receive one star. Funds are rated for up to three time
periods -- 3-, 5-, and 10-years -- and these ratings are combined to produce
an overall rating. Ratings are objective, based entirely on a mathematical
evaluation of past performance. They may be a useful tool for identifying
funds worthy of further research, but should not be considered buy or sell
recommendations.
- --------------------------------------------------------------------------------
DELPHI VALUE FUND - 2005 ANNUAL REPORT 13
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
favorable history, reputation, qualifications and background of KIM and Delphi
as well as the qualifications of their personnel. The Trustees quality of
investment subadvisory services provided by Delphi and its well-structured
control policies and procedures, while encouraging Delphi to continue to develop
infrastructure to enhance its compliance function. The Trustees viewed
favorably that Scott M. Black, an experienced portfolio manager and the
president and founder of Delphi, has continuously served as the Fund's portfolio
manager since inception and has consistently managed the Fund and used the same
style and strategy. The Trustees concluded that KIM and Delphi have the
personnel and the methods essential to performing their duties under the
Investment Advisory Agreements.
NATURE, QUALITY AND EXTENT OF OTHER SERVICES. The Trustees also considered the
nature, quality, cost and extent of the other services provided by KIM and its
supervision of Delphi as the Fund's investment subadviser and of third party
service providers to the Fund. The Trustees determined that KIM had policies and
systems reasonably designed to achieve compliance with the Fund's investment
objective and regulatory requirements while encouraging KIM to increase their
oversight of Delphi's compliance function. Based on these considerations, the
Trustees concluded that the nature, quality, cost and extent of such other
services provided by KIM are satisfactory and reliable and serve the
shareholders of the Fund well.
ADVISORY FEE AND EXPENSES. The Trustees considered KIM's and Delphi's fees under
the Investment Advisory Agreements relative to the advisory fees charged by a
peer group of funds. The Trustees also considered the Fund's expense ratio
relative to industry averages for the Fund's peer group category and the
advisory fees charged by KIM and Delphi to other accounts. The Trustees noted
that while the Fund's advisory fee rate was slightly higher than the median
advisory fee rate for the Fund's peer group category, Delphi's subadvisory fee
rate for the Fund is significantly less than the fee rate it generally charges
its other clients for providing similar services. The Trustees noted the Fund's
expense ratio (after giving affect to the fee waiver) for the institutional
class was below, and for the retail class was slightly above, the median expense
ratio for the Fund's peer group category. The Trustees concluded that the
advisory fee and subadvisory fee are acceptable based upon qualifications,
experience, reputation and performance of KIM and Delphi and the moderate
overall expense ratio of the Fund given the relatively small size of the Fund
and the fund complex.
PROFITABILITY. The Trustees considered the estimated level of profits of KIM and
its affiliates from their relationship with the Fund. This consideration
included a review of KIM's methodology in allocating certain of its costs to the
management of the Fund. The Trustees also considered the financial results
realized by KIM and its affiliates in connection with the operation of the Fund.
The Trustees recognized that increased fixed costs, particularly compliance,
legal and audit fees, have a greater impact on smaller fund families and their
advisers, such as the Trust and KIM, than on larger fund complexes and advisers.
The Trustees concluded that KIM's profits (which are either small or negative)
from management of the Fund, including the financial results derived from the
Fund, are eminently fair to the Fund for the management of the Fund in light of
the business risks involved. The Trustees did not review profitability data for
Delphi because its fee has been negotiated on an arm's-length basis with KIM and
the Fund is not directly responsible for paying Delphi's fees.
ECONOMIES OF SCALE. The Trustees considered whether there have been economies of
scale in respect of the management of the Fund, whether the Fund has
appropriately benefited from any economies of scale, and whether there is
potential for realization of any further economies of scale. The Trustees
concluded that any perceived and potential economies of scale were not yet a
relevant consideration given the size of the Fund.
OTHER BENEFITS TO KIM AND ITS AFFILIATES. The Trustees also considered the
character and amount of other direct and incidental benefits received by KIM and
Delphi and their affiliates from their association with the Fund, including the
brokerage commissions received by, and the amount of Rule 12b-1 fees and sales
commissions retained by, the Fund's distributor. The Trustees concluded that
potential "fall-out" benefits that KIM, Delphi and their respective affiliates
may receive, such as greater name recognition, appear to be reasonable, and may
in some cases benefit the Fund.
In evaluating the Investment Advisory Agreements, the Trustees also reviewed
materials furnished by E*TRADE FINANCIAL, including information regarding
E*TRADE FINANCIAL, its affiliates, personnel, operations and financial
condition. The Trustees also reviewed the terms of the Acquisition and its
possible effects on the Fund and its shareholders. Representatives of KIM
discussed with the Trustees the anticipated effects of the Acquisition, and,
together with a representative of E*TRADE FINANCIAL, indicated their belief that
as a consequence of the proposed transaction, the operations of the Fund and the
capabilities of KIM to provide advisory and other services to the Fund would not
be adversely affected and may be enhanced by the resources of E*TRADE FINANCIAL,
though there could be no assurance as to any particular benefits that may
result.
In their considerations, the Trustees deemed to be especially important the
experience of KIM's and Delphi's key personnel in portfolio management, the
arrangements made to secure the continued service of the key personnel in
portfolio management, the high quality and extent of research and management
services KIM is expected to continue to provide to the Fund, and the
- --------------------------------------------------------------------------------
14 DELPHI VALUE FUND - 2005 ANNUAL REPORT
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
fair and reasonable compensation proposed to be paid to KIM and Delphi under the
Investment Advisory Agreements and that the rate of such compensation is
identical to the rate of compensation under the prior advisory agreements (which
they had recently reviewed and approved). The Trustees also specifically
considered the following as relevant to their approvals: (i) that the fee and
expense ratios of the Fund are reasonable given the quality of services expected
to be provided and are comparable to the fee and expense ratios of similar
mutual funds; (ii) the relative performance of the Fund since commencement of
operations to comparable mutual funds and unmanaged indices; (iii) that the
terms of the Investment Advisory Agreement and Investment Subadvisory Agreement
are substantially identical to those of the prior advisory agreement and prior
subadvisory agreement, except for a different execution date, effective date and
termination date, and the inclusion of escrow provisions (which were applicable
only in the event that the Acquisition closed prior to the approval of the
Investment Advisory Agreements by the Fund's shareholders); (iv) the favorable
history, reputation, qualification and background of KIM, Delphi and E*TRADE
FINANCIAL, as well as the qualifications of their personnel and their respective
financial conditions; (v) the commitment of KIM and E*TRADE FINANCIAL to pay the
expenses of the Fund in connection with the Acquisition so that shareholders of
the Fund would not have to bear such expenses; (vi) the possibility of benefits
that may be realized by the Fund as a result of KIM's affiliation with E*TRADE
FINANCIAL, including any resources of E*TRADE FINANCIAL that would be available
to KIM; and (vii) other factors deemed relevant by the Trustees.
DISCLOSURE OF FUND EXPENSES: We believe it is important for you to understand
the impact of fees regarding your investment. All mutual funds have operating
expenses. As a shareholder of a mutual fund, you incur ongoing costs, which
include costs for portfolio management, administrative services, and shareholder
reports (like this one), among others. Operating expenses, which are deducted
from a fund's gross income, directly reduce the investment return of the fund. A
fund's expenses are expressed as a percentage of its average net assets. This
figure is known as the expense ratio. The following examples are intended to
help you understand the ongoing fees (in dollars) of investing in the Fund and
to compare these costs with those of other mutual funds. The examples are based
on an investment of $1,000 made at the beginning of the period shown and held
for the entire period.
This table on the following page illustrates the Fund's costs in two ways:
ACTUAL FUND RETURN: This section helps you to estimate the actual expenses,
after any applicable fee waivers, that you paid over the period. The "Ending
Account Value" shown is derived from the Fund's actual return for the past six
month period, the "Expense Ratio" column shows the period's annualized expense
ratio, and the "Expenses Paid During Period" column shows the dollar amount that
would have been paid by an investor who started with $1,000 in the Fund at the
beginning of the period.
You may use the information here, together with your account value, to estimate
the expenses that you paid over the period. To do so, simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number given for your Fund in the first line
under the heading entitled "Expenses Paid During Period."
HYPOTHETICAL 5% RETURN: This section is intended to help you compare your Fund's
costs with those of other mutual funds. It assumes that the Fund had an annual
return of 5% before expenses, but that the expense ratio is unchanged. In this
case, because the return used is not the Fund's actual return, the results do
not apply to your investment. This example is useful in making comparisons to
other mutual funds because the SEC requires all mutual funds to calculate
expenses based on an assumed 5% annual return. You can assess your Fund's costs
by comparing this hypothetical example with the hypothetical examples that
appear in shareholder reports of other funds.
Please note that the expense shown in the table are meant to highlight and help
you compare your ongoing costs only and do not reflect any transactional costs
such as sales charges (loads) and redemption fees, which are described in the
Prospectus. If these costs were applied to your account, your costs would be
higher.
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSE EXPENSES PAID
VALUE 7/01/05 VALUE 12/3105 RATIO (1) DURING PERIOD (2)
Actual Fund Return: Retail Class $ 1,000 $ 1,052.60 1.55% $ 8.02
Institutional Class 1,000 1,054.10 1.26% 6.52
Hypothetical 5% Return: Retail Class $ 1,000 $ 1,017.39 1.55% $ 7.88
Institutional Class 1,000 1,018.85 1.26% 6.41
<FN>
(1) Annualized, based on the Fund's most recent fiscal half-year expenses.
(2) Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days in the
most recent fiscal half-year, then divided by 365.
</FN>
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DELPHI VALUE FUND - 2005 ANNUAL REPORT 15
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ADDITIONAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
TAX INFORMATION: During the year ended December 31, 2005, the Fund designates
long-term capital gains of $7,176,289. For the fiscal year ended December 31,
2005, 100.00% of the income dividends qualified for the dividends received
deduction available by the Fund to corporations. For the fiscal year ended
December 31, 2005 certain dividends paid by the Fund may be subject to a maximum
tax rate of 15%, as provided by the Jobs and Growth Tax Relief Reconciliation
Act of 2003. Of the income paid by the Fund, 100.00% of income may qualify for
the 15% dividend income tax rate. Complete information will be computed and
reported in conjunction with your 2005 Form 1099-DIV.
INFORMATION ABOUT TRUSTEES AND OFFICERS: Information pertaining to the Trustees
and officers of the Trust is set forth below. The term "officer" means the
president, vice president, secretary, treasurer, controller or any other officer
who performs a policy making function. The SAI includes additional information
about the Trustees and is available without charge, upon request by calling
(toll free) 1-800-456-2736.
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Other
Term of Portfolios in Trusteeships/
Office Fund Complex Directorships
Name, Address, Age and and Length of Overseen by Held by
Position(s) with Trust TimeServed1 Principal Occupation(s) During Past 5 Years Trustee Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Edward B. Bloom 9 years Chief Financial Officer and Treasurer of 2 None
c/o 20 William Street, Suite 310 International Data Group Inc., a publishing
Wellesley Hills, MA 02481 company.
Age: 55, Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Arthur Dubroff 9 years Chief Financial Officer of Net2Phone, Inc., a 2 Virtual
c/o 20 William Street, Suite 310 provider of Voice over Internet Protocol telephony Communities,
Wellesley Hills, MA 02481 services, from November 2002 to present; Chief Inc.
Age: 55, Trustee Financial Officer of Virtual Communities, Inc, a
software provider, from July 2000 to
the present; Consultant for
Turnberry Consulting, LLC from
October 1999 to present.
- ------------------------------------------------------------------------------------------------------------------------------------
Stuart J. Novick 9 years Senior Vice President, General Counsel and 2 None
c/o 20 William Street, Suite 310 Secretary of Children's Hospital Boston since
Wellesley Hills, MA 02481 April 1997.
Age: 55, Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES2
- ------------------------------------------------------------------------------------------------------------------------------------
Eric M. Kobren 9 years President of Mutual Fund Investors Association, 2 None
20 William Street, Suite 310 Inc.; President of Kobren Insight Management, Inc.
Wellesley Hills, MA 02481 and a registered representative of E*TRADE
Age: 52 Chairman and President Securities, LLC. These are a financial publishing
company, a registered investment advisory firm and
a registered broker-dealer, respectively. Prior
to November 2, 2005, President of Kobren Insight
Brokerage, Inc. Since 2001, Managing Member of
Alumni Capital, LLC, a General Partner to a
private investment partnership.
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICER(S) WHO ARE NOT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Eric J. Godes 9 years Managing Director of Kobren Insight Management, N/A N/A
20 William Street, Suite 310 Inc. and Managing Director and a registered
Wellesley Hills, MA 02481 representative of E*TRADE Securities, LLC. Prior
Age: 44 Chief Financial Officer, Vice to November 2, 2005, Managing Director of Kobren
President, Treasurer, Secretary Insight Brokerage, Inc. and Alumni Capital, LLC, a
registered broker-dealer and general partner to a
private investment partnership, respectively.
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Trustees serve for an indefinite term until the earliest of a Trustee's: (i)
removal by a two-thirds vote of the Board of Trustees or shareholders, (ii)
resignation, (iii) death, (iv) bankruptcy or (v) adjudicated incompetence.
2 "Interested person" of the Trust as defined in the 1940 Act. Mr. Kobren is
considered an "interested person" because of his affiliation with Kobren
Insight Management, Inc., which acts as the Trust's investment adviser.
</FN>
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16 DELPHI VALUE FUND - 2005 ANNUAL REPORT
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
trustees has determined that Arthur Dubroff is qualified to serve as an audit
committee financial expert serving on its audit committee and that he is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$31,000 for 2005 and $39,475 for 2004.
AUDIT-RELATED FEES
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $0 for 2005 and $2,844 for 2004.
TAX FEES
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $5,000 for 2005 and $6,636
for 2004.
ALL OTHER FEES
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are $0
for 2005 and $0 for 2004.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
The Audit Committee of Kobren Insight Funds (the "Trust") shall
pre-approve all audit, review, attest or non-audit services (other than
DE MINIMIS non-audit services as defined by the Sarbanes-Oxley Act of
2002) to be provided to the Trust by the independent auditors. The
Audit Committee shall also pre-approve all non-audit services (other
than DE MINIMIS non-audit services as defined by the Sarbanes-Oxley Act
of 2002) to be provided by the Trust's independent auditors to the
investment adviser or subadviser to any Fund and any entity
controlling, controlled by, or under common control with any investment
adviser or subadviser that provides ongoing services to the Trust, if
the engagement relates directly to the Trust's operations and financial
reporting. The Audit Committee has delegated, to the extent permitted
by law, pre-approval responsibilities to the Chairman of the Audit
Committee who shall report to the Audit Committee regarding approved
services at the Audit Committee's next regularly scheduled meeting.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) of this Item that were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) 0% for 2005; 100% for 2004
(c) 100% for 2005; 100% for 2004
(d) 0% for 2005; 0% for 2004
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was less than fifty percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $22,500 for 2005 and $17,175 for 2004.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) KOBREN INSIGHT FUNDS
By (Signature and Title)* /S/ ERIC M. KOBREN
-------------------------------------------------------
Eric M. Kobren, Chairman & President
(principal executive officer)
Date FEBRUARY 19, 2006
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /S/ ERIC M. KOBREN
-------------------------------------------------------
Eric M. Kobren, Chairman & President
(principal executive officer)
Date FEBRUARY 19, 2006
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By (Signature and Title)* /S/ ERIC J. GODES
-------------------------------------------------------
Eric J. Godes, Chief Financial Officer, Vice President,
Treasurer & Secretary
(principal financial officer)
Date FEBRUARY 17, 2006
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* Print the name and title of each signing officer under his or her signature.